Finance Minister AMA Muhith yesterday said many from outside the Sonali Bank were involved in the much-talked-about Hall-Mark swindle.

Without mentioning any names, he said those linked to the scandal had been identified following much investigation. And cases would be filed in this regard “very soon”.

Muhith added it was a mistake on his part to say that crores of taka swindled out of a Sonali Bank branch was a petty sum.

“I have acknowledged my mistake, and those who don't admit mistakes lack moral strength”, he told reporters at his secretariat office hours before leaving for China last night on a 10-day tour to join the World Economic Forum meeting.

The minister replied to journalists' queries on a number of issues, including Padma bridge funding, Grameen Bank and Mashiur Rahman's and his resignation.

Recently, a Bangladesh Bank probe found serious anomalies in the lending of Tk 3,606 crore to the Hall-Mark Group and five other companies.

Half of the loans, granted by the Sonali Bank's Ruposhi Bangla Hotel branch, were based on forged documents.

Muhith yesterday said it was quite impossible that such a grave offence was being committed and yet nobody in Sonali Bank had noticed it.

Replying to a query about extending the tenure of the Sonali Bank chairman and directors for another two years, the finance minister said a three-member board led by the chairman would remain in office.

Muhith said a government official and a chartered accountant had been kept as board members and the tenure of no other director had been extended.

A board is necessary for taking decisions on a number of matters, including cases regarding the scam, he added.

The minister said the Sonali Bank board would be reconstituted and a decision in this regard taken on his return from China.

About the demand for his resignation, he said, “There are many demands like this …. But I have not taken any decision.”

The minister also spoke on the bridge project. “We have been in talks with the World Bank, Asian Development Bank and Japan International Cooperation Agency (Jica) in this regard. I will speak about this after the talks conclude.”

Muhith declined to comment on the WB condition relating to the removal of the Prime Minister's Economic Affairs Adviser Mashiur Rahman for the funding of the project.

“Talks are also going on with the World Bank about this matter. I cannot say anything about this at this point.”

GRAMEEN BANK
Also yesterday, Muhith defended a recent change in the Grameen Bank Ordinance, saying the government had brought in the amendment to appoint a full-time managing director.

The appointment “must be done”; it had long been pending owing to objections apparently from directors, he said.

The world-renowned microcredit organisation has been run by an acting chief executive since its founder, Nobel Laureate Prof Muhammad Yunus, stepped down in May last year.

Grameen Bank supporters both at home and abroad and also the nine elected women borrower-directors say the change has been introduced to curb the authority of the majority of the board in choosing the managing director and give more powers to the government-picked chairman.

The minister also said the law did not permit the powers exercised over the last 27 years in appointing the managing director.

"The government allowed this to let a good thing continue. But there are two sides of the coin -- one is flexibility and the other is unaccountability,” he added.

News: The Daily Star/Bangladesh/10-Sep-12

While monetary policy is regarded as the most important economic guideline in developed countries, it is treated as a complementary promise to fiscal policy in most developing countries. In Bangladesh, the scenario is even worse. Here the finance minister, as a fiscal-policy leader, dictates explicitly what Bangladesh's monetary policy should be -- exhibiting the total absence of monetary-policy independence.

Bangladesh Bank, as the central bank of the country, announced its monetary policy in July this year as it does every year. Interestingly, the central bank's restrained stance on monetary policy this July was no surprise, because the finance minister had clearly signalled the stance of the upcoming monetary-policy in his budget speech that was made public in June. The finance minister explicitly declared that the upcoming monetary policy will be 'restrained,' making the monetary-policy statement simply a 'compliance report' by the central bank. While the influence of the government on the central bank is well known, particularly in developing countries, this type of predetermination lacks respect to the monetary authority, and is never seen in neighbouring countries such as India and Pakistan.

Given the coverage of its operation, the central bank is the most powerful economic institution even in a developing country like Bangladesh. For example, the amount of banking-sector loans is almost 52 percent of total national output, whereas the fiscal budget covers only 18 percent of national income. Of course, that 18 percent is very crucial to mobilising outstanding loans of 62 billion dollars, but it must not be ignored that the central bank plays a gigantic role in growth by involving the largest segment of national workforce of the economy. As the monetary-policy statement of 2012-2013 asserts, the two main objectives of the central bank include controlling inflation and fostering economic growth. This dual mandate of Bangladesh Bank becomes hard to accomplish when the finance ministry targets high growth but low inflation. High growth is often inflationary and high inflation is always detrimental to growth. In the last fiscal year, Bangladesh had achieved economic growth of 6.4 percent, while inflation was slightly above 10 percent. For the fiscal 2012-2013, the government aims at achieving growth of 7.2 percent but targets inflation at 7.5 percent, making the task of the central bank tougher than before. Since moderate inflation is the prime goal of any monetary policy, Bangladesh Bank is left with no option but to adopt a restrained monetary policy that limits broad-money growth to 16 percent and reserves money growth to 14.5 percent for fiscal 2013.

The government's excessive influence on the central bank is a sign of authoritarian economic management that contradicts public policy on deregulation and the market economy. We have a bad tradition of seeing the central bank as an accommodating institution to fiscal desperation that usually originates from short-term political priorities. That is why money supply grows so fast in Bangladesh and hence inflation hovers over the double-digits. This tradition must be changed. The central bank must be empowered with greater monetary policy independence to bridle inflation and ensure macro-stability to eventually stimulate growth.

If money-velocity growth is assumed to be constant and economic growth turns out to be 7 percent, money growth of 16 percent will bring inflation down to around 9 percent, which is still above the targeted inflation of 7.5 percent. Hence, money supply must be more conservative than it is now, but that stance may reduce the growth of private credit, which again will lower economic growth. Thus, Bangladesh Bank is forced to operate in a difficult zone when inflation is already of double digits.

The scenario becomes even worse when the government spells out a long-term inflation rate of 5 percent in the budget speech of 2012-2013. We are not sure where this magic number of 5 percent comes from, but we are sure that the government wants moderately low inflation for the long run to make economic growth sustainable. If that is the case, Bangladesh Bank must continue its conservative stance on money growth until inflation drops down to 5 percent. Neither reserve-money growth of 14.5 percent nor broad-money growth of 16 percent looks conducive to long-term inflation of 5 percent. Money growth should fall below 15 percent in a gradual fashion, and that might temporarily lower output growth.

We have to accept this tradeoff to make Bangladesh Bank function as per long run goals of macro-stability and sustainable growth. Then monetary policy surely requires independence. Various studies show that a higher degree of monetary-policy independence is associated with a lower inflation across the globe. The government's expectations on Bangladesh Bank are too high to accomplish. It wants that the central bank will kill two birds with one stone every time. If low inflation is a priority, as it should be the case for the sake of sustainable growth, the government has to compromise on ambitious growth targets at least in the short run.

Inflation tormented the global economy over the 1970s. Paul Volcker, the Federal Reserve chair, realised that controlling inflation must be the first priority for a central banker. He tightened money supply to an extreme point even knowing that it will lower output growth. America experienced its first manmade recession in history in the early 1980s, but the scenario eventually took a positive turn. Not only did inflation come under control, but the US economy also entered the long boom for 17 years until the end of the 1990s.

Volcker was able to accomplish his goals in a sequential fashion because he could work independently. He shot one bird at a time without any concession to inflation. Time has come for our central bank to act first on inflation in the similar fashion. Are we ready to make our governor accountable directly to people and parliament, rather than compliant to the fiscal desperation? The central bank, the main anchor of the economy, must work independently to ensure macro-stability and respectable growth in an emerging economy.

The writer is an associate professor of economics at the State University of New York at Cortland. He can be reached at biru.paul@cortland.edu.

News: The Daily Star/Bangladesh/06-Sep-12

The state of the world economy these days reminds me of the famous telegram from an Austrian general, responding to his German counterpart toward the end of World War One. The German described the situation in his sector of the Eastern front as “serious but not catastrophic”. In the Austrian sector, the reply came, “the situation is catastrophic but not serious”. In much of the world today the economic situation is verging on catastrophic, but “not serious” seems a perfect description of the political response.

Four years after the Lehman crisis, economic activity and employment in the OECD has not yet returned to its pre-crisis level. Unemployment is at postwar highs in every major European country apart from Germany and, while the US jobless rate is now a little below its postwar record, it has been stuck above 8 percent for longer than at any time since the Great Depression. And in Britain, the long-term loss of output assumed by the government's latest budget forecasts implies, according to Goldman Sachs calculations, that the six months of the post-Lehman crisis did greater permanent damage to the country's productive capacity than the Great Depression or World War Two.

Now consider the response. In the US, the four years since Lehman have been dominated by economic debates among politicians, media commentators and business leaders on issues that are almost totally irrelevant to unemployment and the pace of economic recovery: how to reduce long-term budget deficits and whether to tweak the top rate of income tax from 36 percent to 39.6 percent. In Britain, the biggest economic controversy this year has been the extension of value added tax to hot pies. Europe's response to the deepest economic depression in living memory -- and an even more alarming xenophobic nationalism that threatens the literal disintegration of the euro and the European Union --has been to debate the bureaucratic “modalities” of bank regulations, fiscal treaties and pension reforms in the next decade.

How to explain this insouciance in the face of the gravest threat to the Western world since the height of the Cold War? In the US and Britain the answer is straightforward, if unappealing: party politics. In Britain, the Conservative-Liberal coalition has managed to lay all the blame for the country's economic troubles on Labour's Gordon Brown, so far at least. Thus there has been very little public pressure on the Cameron government to change its economic policies, and no political advantage in doing so.

In the US, the Obama administration's efforts to revive the economy with public spending have been stifled by congressional Republicans, while Democrats have thwarted conservative ideas about using tax cuts to stimulate enterprise, investment and consumption. Business leaders and media opinion-formers have aggravated this political impasse by whipping up fears about budget deficits, despite the record-low yields set by the markets on US Treasury bonds.

The good news is that US politics created a self-stabilising feedback of sorts. If the US economy continues to deteriorate, the Republicans will probably win both the presidential and congressional elections and would then be free to pursue an aggressive tax-cutting policy modelled on Reaganomics. Big tax cuts would doubtless increase budget deficits, but they might well pull the US out of recession as they did in 1983. If, on the other hand, the US resumes tolerable levels of economic growth and employment creation, then a re-elected Obama administration would have a strong mandate to overcome or co-opt what would then be a chastened Republican opposition.

Now for the bad news, which comes, of course, from Europe. The euro zone, in contrast to the US and Britain, is paralysed not by cynical political calculations but by profound misunderstandings of economics and finance. European leaders do not seem to understand that the fiscal and banking unions they are relying on to save the euro can only work under a very specific political condition: Restrictions on national sovereignty over budgets and bank regulation (as demanded by Germany and resisted by France, Italy and Spain) have to be agreed on at the same time as mutual support for debts (as demanded by France, Italy and Spain, and resisted by Germany). Moreover, the banking and fiscal unions can only work if they are backed by a central bank commitment to buy government bonds and thereby maintain near-zero interest rates for a long period, as in the US and Britain.

Anatole Kaletsky is an award-winning journalist and financial economist who has written since 1976 for The Economist, the Financial Times and The Times of London before joining Reuters.

The Daily Star/Bangladesh/ 15th July 2012

The Foreign Investors' Chamber of Commerce and Industry (FICCI) termed the 2012-13 national budget proposed by the finance minister on Thursday, is somewhat bold and challenging at the backdrop of global economic recession. The chamber appreciates the measures especially the budget allocation for energy and power, communication and education sectors, according to a press release. FICCI in its press release said the projected borrowing apparently from banking sector will have affect credit flows to private sector and may cause liquidity problem. However, the Foreign Chamber feels that it will require strong monitoring to achieve the goals set in the budget. It has appreciated efforts to tighten the provision for the whitening of untaxed money, measures to improve capital market reducing the tax rate of merchant bank and brokerage house and introducing the provision for exemption of tax from dividend income. The Foreign Chamber has expressed its concern about the dependence of budget on foreign aid and loan from local source largely from banking sector, introduction of transfer pricing, imposition of 2 per cent tax on the gross bill of mobile phone which will affect 90 million people. The chamber also expressed its concern on withdrawal of the charging of minimum tax at 0.5 per cent of companies gross receipts irrespective of profit or loss, rationalisation of deduction of VAT at source and simplification of the procedure of price declaration, withdrawal of supplementary duty on locally manufactured products and withdrawal of the provision regarding inadmissibility of bonus royalty and technical know-how fees. FICCI feels that the proposed budget with necessary amendments will improve the socio-economic condition of the country.

News: The Independent/ Bangladesh/ 9-Jun-2012

Credit card is a very common instrument for our day to day life, it is known as plastic money also. At present in Bangladesh most of the private commercial banks offer the credit cards to there customers, but still it remains question how many of them are aware about the credit card.

A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

A credit card is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. Most credit cards are issued by banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1. This is defined as 85.60 × 53.98 mm (3.370 × 2.125 in) (3-3/8 × 2-1/8 in) in size. Credit is a method of selling goods or services without the buyer having cash in hand. A credit card is only an automatic way of offering credit to a consumer. According to Encyclopedia Britannica, "the use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers." However, references to credit cards have been made as far back as 1890 in Europe. Early credit cards involved sales directly between the merchant offering the credit and credit card, and that merchant's customer. Around 1938, companies started to accept each other's cards. Today, credit cards allow you to make purchases with countless third parties. At presents credit cards comes from different format with different limit. And the card holders have the choise of purchase through the card from his own country as well as through out the world. Credit cards were not always been made of plastic. There have been credit tokens made from metal coins, metal plates, and celluloid, metal, fiber, paper, and now mostly plastic cards. In 1950, the Diners Club issued their credit card in the United States. The Diners Club credit card was invented by Diners' Club founder Frank McNamara and it was intended to pay restaurant bills. A customer could eat without cash at any restaurant that would accept Diners' Club credit cards. Diners' Club would pay the restaurant and the credit card holder would repay Diners' Club. The Diners Club card was at first technically a charge card rather than a credit card since the customer had to repay the entire amount when billed by Diners Club. The another type of plastic card is debit card. The basic difference between the debit card and the credit card is, by the debit card one may withdrawl the amount which is available to their account but in case of credit card one may withdrawl the amount which is sanctioned by the bank without the availability of the certain fund.

American Express issued their first credit card in 1958. Credit cards were first promoted to traveling salesmen (more common in that era) for use on the road. By the early 1960s, more companies offered credit cards, advertising them as a time-saving device rather than a form of credit. American Express and MasterCard became huge successes overnight. At present The City Bank in Bangladesh distribute and maintain the American Express Credit card. Bank of America issued the BankAmericard (now Visa) credit card later in 1958.

Credit cards are issued by a credit card issuer, such as a bank or credit union, after an account has been approved by the credit provider, after which cardholders can use it to make purchases at merchants accepting that card. Merchants often advertise which cards they accept by displaying acceptance marks – generally derived from logos – or may communicate this orally, as in "Credit cards are fine" (implicitly meaning "major brands"), "We take (brands X, Y, and Z)", or "We don't take credit cards". When a purchase is made, the credit card user agrees to pay the card issuer. The cardholder indicates consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a personal identification number (PIN). Also, many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet, known as a card not present transaction (CNP).

Electronic verification systems allow merchants to verify in a few seconds that the card is valid and the credit card customer has sufficient credit to cover the purchase, allowing the verification to happen at time of purchase. The verification is performed using a credit card payment terminal or point-of-sale (POS) system with a communications link to the merchant's acquiring bank. Data from the card is obtained from a magnetic stripe or chip on the card; the latter system is called Chip and PIN in the United Kingdom and Ireland.

For card not present transactions where the card is not shown, merchants additionally verify that the customer is in physical possession of the card and is the authorized user by asking for additional information such as the security code printed on the back of the card, date of expiry, and billing address.

Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the cardholder may dispute any charges that he or she thinks are incorrect. Otherwise, the cardholder must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the entire amount owed. The credit issuer charges interest on the amount owed if the balance is not paid in full (typically at a much higher rate than most other forms of debt). In addition, if the credit card user fails to make at least the minimum payment by the due date, the issuer may impose a "late fee" and/or other penalties on the user. To help mitigate this, some financial institutions can arrange for automatic payments to be deducted from the user's bank accounts, thus avoiding such penalties altogether as long as the cardholder has sufficient funds.

The benefits of credit card is for the issuer, the card holder and the marchent. The card issuers gets the interest from the card holder and also provide the service to them. And the marchents gets the advantages to sell the product on credit and the card holder gets the support to purchase the product at the time of there need. A credit card may be benefited for all if it is maintained properly.

- Article Written By: Md. Mahfuzur Rahman, BankInfoBd

References:
http://inventors.about.com/od/cstartinventions/a/credit_cards.htm
http://www.creditcards.com/credit-card-news/credit-cards-history-1264.php
http://en.wikipedia.org/wiki/Credit_card