State-run commercial banks are running with 11.27 percent default loans, double the industry average, although they were corporatised about five years ago to make a turnaround, the central bank said yesterday.

Sonali Bank, the country's largest bank, has the highest percentage of non-performing loans at 17.89 percent or Tk 5,705 crore.

Janata Bank has 10.7 percent bad loans compared to the 6.12 percent industry average.

“The amount of default loans at the state banks is still high despite being corporatised,” said Bangladesh Bank Governor Atiur Rahman.

His comments came at a meeting with the chief executives of Sonali, Janata, Agrani and Rupali banks at the BB headquarters in Dhaka.

The four banks sign memorandum of understanding (MoU) every year with the central bank for developing banking operations including operation costs, availability of capital, realisation of default loans, reduction of loss incurring branches and risk management.

The BB also sets some targets for the banks through the agreement and reviews their achievements in every three months.

Rahman said both the amount and the rate of non-performing loans of all the state banks went down in the last quarter of 2011 compared to the previous quarter.

The bad loan recovery rate is also not satisfactory with the three banks apart from Janata.

Last year, Sonali Bank could recover only 14.82 percent of the target from its top 20 loan-defaulters. Agrani Bank could retrieve 57.03 percent and Rupali Bank only 0.04 percent of the targeted bad loans.

Janata Bank fared well, recovering 91.99 percent of the target.

“The banks have to play more effective roles in recovering the default loans,” said Rahman. “The recovery cell of the banks has to be made more effective in realising the bad loans.”

He said the state banks, however, have been able to maintain 11.68 percent capital adequacy in compliance with Basel-II regulations.

The banks need to hold at least 10 percent capital adequacy.

The governor asked the banks to prepare and submit a comprehensive capital plan in the next two months, as the central bank is going ahead with implementing Basel-III.

Rahman said the banks' implementation of the core risk management guideline has been at a marginal or fair level in most cases, which has to be improved to a satisfactory level.

He categorically said the central bank would not tolerate any breach of the regulator's prudential regulations.

He also asked the banks to be more cautious about their asset liability management.

News: The Daily Star/ Bangladesh/ 23-April-2012

Al-Arafah Islami Bank Ltd recently launched its 'Fast Cash' debit card for its clients.

Badiur Rahman, Chairman of the Bank, inaugurated the operation of new debit card at a function as Chief Guest, said a press release.

Directors of the Bank Alhajj Md. Harun-Ar rashid Khan, Alhajj Abdul Malek Mollah, Alhajj Mohammad Haroon and Managing Director Ekramul Hoque were present on the occasion.

Deputy Managing Director Md Rafiqul Islam, Head of Depart-ments Khondoker Nayeemul Kabir, Md. Mofazzal Hossain and Kazi Towhidul Alam were also present.

From now, customers of the bank will be able to draw money from ATM booths 24x7 using 'Fast Cash' debit card.

News: Daily Sun/ Bangladesh/ 23-April-2012

HSBC Group recently issued international Renminbi Bond (RMB) in London, first time outside of Chinese sovereign territories. The group issued the bond in London, the global financial hub, marking a milestone in its efforts to become a centre for offshore RMB trading alongside Hong Kong, said a press release. HSBC has been a major player in the Chinese bond market since 2007 and have topped the industry league tables in terms of issuance. It has proved its capacity to fund offshore RMB assets in London and contribute to the European as well as the global investor base. Stuart Gulliver, Group’s chief executive said: “We are proud to be able to issue this bond. It represents another step in London's development as a premier international trading centre for the Renminbi and is an early sign of the huge potential that this market represents.” HSBC is the first institution to list an RMB bond on the LSE to attract European investment.

News: Daily Sun/ Bangladesh/ 23-April-2012

Ibsan Islam Edi and Ibnat Islam Etu

The central bank has finally approved nine more banks in addition to existing 47 commercial banks in Bangladesh. Three new NRB commercial banks, sponsored by non-resident Bangladeshis (NRBs), and six private commercial banks (PCBs), have been approved aiming to help boost the inflow of foreign exchange and strengthen the ongoing financial inclusion programmes through bringing unbanked people under the banking network respectively.

The letters of intent (LoIs) `have already been issued to the sponsors of such approved banks. There have been many significant developments in the economy of Bangladesh since 2000-2001, the central bank stated, explaining the economic context and rationale behind issuing licences in favour of new banks.

The economy has grown and the banking system has become more competitive but there are still a large number of under-banked people in Bangladesh.

Recent estimates from a survey conducted by the Institute of Microfinance (IoF) found that only 45 per cent of the nearly 9000 households surveyed do have access to banks and micro-finance institutions (MFIs) for loans.

The population per branch (21065) and the ratio of loan accounts per 1000 adults (42yrs) suggest that the outreach of the formal financial sector in Bangladesh is lower than that in India (14485 and 124 respectively) and Pakistan (20340 population per branch and 47 loan accounts per 1000), according to the statement of IoF.

Bangladesh Bank assumes that the new banks will help increase the quality of banking services by increasing competition in the banking sector. They will also be able to meet the unfulfilled demand for credit by the private sector whose needs have grown in line with a fast expanding economy.

The central bank noted that, for new banks the ratio of opening rural and urban branch will be 1:1 which will help increase bank branches in rural areas and improve financial inclusion. But the home truth is; no bank can expand in the rural areas before concentrating and making business in urban areas.

Earlier, the issue of granting licenses to new banks caused many to raise their eyebrows. Questions were being asked by authentic experts, bankers and people even on the board of directors of the central bank about the wisdom of allowing more banks, a sector that had been struggling hard to cope with the problem of liquidity shortage for years together. The banking sector is already saturated with 47 commercial banks.

There was no logic to allow new banks at this moment of the country. The new comers will create an unhealthy competition in banking services, affect stability of the sector and cause profitability of the existing banks to suffer. The entry of more banks will trigger a flight of huge fund including Tk 36.00 billion from existing banks to place as paid-up capital against new banks; this will lead to further deteriorations of the stringent situation already prevailing in the banking sector.

The similar incident will take place for quality employees of the existing banks. All these will lead to a greater mismatch between their credit and deposit ratio and acute shortage of good bankers. The banks will be forced to go for risky investment after collecting deposit at high rate from an already saturated market. It will seriously affect the overall bank- business and the industry as well.

Banks are to facilitate all kinds of economic activities and finance many other needs of the people, in both urban and rural areas. But overcrowding of the banking sector is not at all desirable as this, instead of meeting those objectives, would create problems for the sector itself, particularly the existing operators in the sector. This might even adversely impact the vital sectors of the economy in the process.

It was unlikely that the board of directors of Bangladesh Bank were not aware of that fact. Yet they were trying to select the right ones since the government is unrelenting in its decision to allow new banks. Opening up of new banks on political consideration, as reported time and again, may reduce the confidence of the clients in banks as well as impair the management quality of the overall banking sector.

Meanwhile, some speculators state that as soon as new banks kick off their operations a heavy pressure on deposits of existing banks would be exerted. The latter are likely to see a flight of deposits while their existing loan liabilities including non-performing loans (NPLs) will remain at an unchanged level. This is likely to cause a mismatch between their deposits and outstanding amount of credits or loan portfolio.

Now that the central bank already approved new banks and issued the LoIs, it will be just beating about the bush to say anything to the contrary. Rather, now it is better to design how all these banks can be managed smoothly. In this regard the following measures may be implemented:

* The new banks should introduce new and innovative services and should scale up their products for the sake of making the government decision meaningful.

* There is no denying that the quality of the sponsors largely influences the quality of operation of banks as such sponsors play an important role in the decision-making. So, the central bank will have to closely examine the track records of the sponsors and it must not give in to political pressure of any sort on this issue. The quality of the bank directors should be maintained scrupulously.

* The central bank may concentrate its attention on the colour of money of the proposed directors who will be investing as the paid-up capital.

* The central bank must have to play the role of a watchdog in case of shopping the investment clients of new banks from existing banks by approving the higher limit then the present outstanding.

* The central bank must have to be vigilant in examining the proposed investment clients of new banks, particularly those whose cases have to be rescheduled. Getting rescheduled, the sick clients in the existing banks become very much performing in new banks for the time being in the backdrop of opening new banks in the market.

* The central bank needs to require to consider several other issues, prior to giving effective permission to new banks, including ownership quality.

* The vital issue that deserves priority attention of both central bank and the government is better banking coverage of the hitherto neglected rural areas. The new banks may be asked to serve the rural people extensively.

* On the top of everything, both the central bank and the government will have to ensure the entry of stronger players in the banking arena and keep close watch on the effects of such an entry on the overall banking industry.

* The Bangladesh Bank and Bangladesh Institute of Bank Management (BIBM) have to take preparation on structuring the banks by training up the bankers. Because market will be oversaturated as soon as the new banks start operations. The precipitations of banks may appear at the bottom of the banker of banks in Bangladesh. Time has arrived; the possibility of merger of weak banks cannot be laughed away.

Still we hope for the best. The newly approved three NRB commercial banks namely, NRB Commercial Bank Ltd, NRB Bank Ltd and NRB Bank Ltd will bring USD150.00 million as paid up capital of the non-resident Bangladeshis (NRBs). Expectations of the people about the six approved PCBs, such as Union Bank Limited, Modhumoti Bank Limited, the Farmers Bank Limited, Meghna Bank Limited, Midland Bank Limited and South Bangla Agriculture and Commerce Bank Limited, are quite high.

Now the nation is passionately staring at the functions of the new-born banks with a ray of hope of even development of the people of all the strata in the days to come.

Financial Express/Bangladesh/ 19th April 2012

Institute of Training Innovative Management and Technology, Intimate, singed a memorandum of understanding (MoU) with Acasia Global Consulting, Kolkata, India at a Hotel in Gulshan, Dhaka recently to establish a strategic partnership for jointly providing advanced management training and consulting services in the fields of banking and corporate finance in Bangladesh, says a press release.

The MoU signing ceremony was attended by a large number of distinguished guests including the Governor of the Bangladesh Bank Dr Atiur Rahman.

Intimate also organised four-day training programmes on subjects relating to risk management and Basel II in cooperation with its Strategic Partners, Acasia Global Consulting, Kolkata, India for Mutual Trust Bank Ltd and Bangladesh Commerce Bank Ltd.

The senior level managers of both the banks participated in the programmes which were conducted by Prof.
Arup Choudhury of Acasia in an interactive manner and with case-studies. All the programmes were successfully concluded with the distribution of certificate of appreciation among the participants.

The Independent/Bangladesh/ 19th April 2012