The board of the state-owned Sonali Bank Ltd (SBL) has finally approved the appointment of Pradip Kumar Dutta as Managing Director (MD) for the next two years term.

Pradip, currently Managing Director of Rajshahi Krishi Unnayan Bank, is expected to join Sonali Bank on the next Sunday, an SBL official confirmed Wednesday.

The official said the board decision on appointment of the new MD has been sent to the Bangladesh Bank.

If the central bank approves the appointment, then Pradip will replace Humayun Kabir who had joined the SBL on 20th of May 2010.

Meanwhile, the finance minister is expected to sit with the BB governor and the banking division secretary today (Thursday) to discuss the appointment of SBL managing director and two other state-owned banks – Agrani and Rupali – as their contractual tenure is about to expire.

The Daily Sun/Bangladesh/ 14th June 2012

Despite several assurances from Bankers Association of Bangladesh (BAB) to enhance their exposure in the capital market, commercial banks’ investment in the market still remains as low as 2.25 percent of their total liabilities.

As per the latest Bangladesh Bank statistics, investment of 30 commercial banks reached to Tk 153.29 billion which was 2.25 percent of their total liabilities of Tk 4885.13 billion.

According to the Banking Companies Act, a bank can invest up to 10 percent of its total liability in the share market.

As per the BB data, current investment of four state-owned banks in the share market is Tk 39.72 billion, which is 2.16 percent of their total liabilities.

Stock investment of Agrani Bank stands at Tk 12.97 billion, Janata Bank Tk 10.85 billion, Rupali Bank Tk 4.89 billion and Sonali Bank Tk 12 billion.

The total investment of private commercial banks in the stock market is Tk 96.02 billion, which is 2.92 percent of their total liabilities.

Nine foreign banks invested Tk 230 million and two specialized banks invested Tk 3.87 billion.

The Daily Sun/Bangladesh/ 14th June 2012

The Bangladesh Bank will adopt a “people-centric” growth and empowerment model to provide economically deprived people with financial services to ensure overall economic development, Governor Atiur Rahman said yesterday.

The central bank will do the job under its Bangladesh Bank financial inclusion initiatives with the thematic outline “Including Excluded People”.

The initiatives were presented at the inaugural session of the national consultations in preparation for the international conference on people's empowerment model, organised by the foreign ministry, in the capital.

Rahman defined the financially excluded people as those who are dwelling in remote, sparsely populated locations and deprived of financial and social services and the financially excluded institutions are those micro and small scale farm and non-farm organisations which are excluded from financial services.

As an example of an initiative, for the first time, savings accounts of more than 9.6 million farmers have been opened -- each with a deposit of Tk 10 only -- and are being used for government transfers such as diesel subsidy.

Until June 10, Bangladesh Bank has provided Tk 490 crore to BRAC's refinancing scheme with which the development organisation provided loans to 4.15 lakh sharecroppers in 250 upazilas of 48 districts.

Asked how effectively the initiative is being implemented, the BB chief told The Daily Star: “I personally call farmers' mobiles randomly to find out whether they received the money.”

Under the BB's directive, student loans are also given out to poor students living on the outskirts of the city, which Rahman described as a “high-return investment”.

When the people living on the outskirts are brought under the initiative, every worker working in the capital will be able to send money with their mobile phones to their remote village in Kurigram also, he said.

The Daily Star/Bangladesh/ 14th June 2012

The World Bank has identified a number of reasons that dealt a blow to Bangladesh economy.

The reasons include political turmoil and periodic strikes, widespread electricity shortages, near double-digit inflation, fiscal deficit and deteriorating external balances.

Bangladesh's economic growth may be 6.4 percent in the next fiscal year, the lender said in its Global Economic Prospects June 2012 released worldwide on Tuesday.

In the current fiscal year, the government has estimated the GDP (gross domestic product) growth rate at 6.3 percent, down from 6.7 percent last year.

The WB report also said exports have been affected by weaker demands from key European trade partners, while infrastructure constraints, especially electricity shortages, have become acute, partly due to higher crude oil prices.

It also said agriculture output growth is also estimated to have slowed to less than 2 percent in the current fiscal year from the previous fiscal year's 5.1 percent. But a good crop harvest is expected for the current agriculture season due to favourable weather, the WB said.

The report said monetary tightening and easing of food inflation are likely to continue to put a downward pressure on the overall inflation.

Non-food inflation, however, remains persistently high partly due to the still-high costs of imported inputs and pressure from a huge government spending.

The report also said South Asian countries, including Bangladesh, may require a significant upward adjustment to the international fuel prices to ease the pressure on subsidy.

The WB said, even after recent price hikes in Bangladesh and Sri Lanka, energy products are still subsidised to some extent.

Moreover, election schedules in the coming two years in several south Asian countries and an intention to protect consumers from the inflationary impact of higher fuel prices could make it difficult for the governments to reduce subsidies and raise the oil prices, it said.

The Daily Star/Bangladesh/ 14th June 2012

The central bank has defined merchant banks as non-banking financial institutions (NBFIs), creating confusion over the status of the merchant banks, which are involved in share market activities, not in the financial sector.

Bangladesh Bank in a letter to the Securities and Exchange Commission (SEC) on June 6 said the merchant banks are considered as NBFIs as per Section 2(b) of Financial Institution Act, 1993.

A clause of the act included merchant banks, among others, in the category of financial institution.

The SEC on June 10 forwarded the central bank's letter to Bangladesh Merchant Bankers Association (BMBA), a platform of the merchant banks.

Earlier, the stockmarket regulator on May 20 sought the banking regulator's opinion about the status of merchant banks.

The finance minister in his budget speech also treated the merchant banks as NBFIs, and proposed to reduce their income tax from 42.5 percent to 37.5 percent.

Later, the BMBA at a press briefing said the government's offer to reduce the income tax for merchant banks was met with a wave of confusion, as they were already paying the lower rate of 37.5 percent.

Merchant banks provide a myriad of financial services, ranging from underwriting shares to lending to stock investors amongst other activities. Due to their multi-faceted roles as financial institutions they are not classified in the same bracket as 'banks and non-bank financial institutions'.

The National Board of Revenue (NBR) wrote a letter to merchant banks putting them in the same classification as the rest, an idea which was met with vehement objections from merchant bankers. The plan did not come into effect.

“The merchant banks have always paid 37.5 percent tax while it is 42.5 percent for banks and non-bank financial institutions,” Mohammad A Hafiz, president of BMBA, told the press briefing.

“We are also not allowed to take deposits, disburse loans and perform other financial activities what NBFIs can,” Hafiz said.

Merchant banks, as opposed to 'banks and non-bank financial institutions', are not licensed by the central bank but by the SEC, he said.

There are 43 full-fledged merchant banks in the country now.

The Daily Star/Bangladesh/ 14th June 2012