The Tongibari branch of National Bank Ltd (NBL) distributed agri loans amongst potato farmers recently. The bank also engaged themselves with a social activity by providing warm cloths to the poor people on this occasion.

Bangladesh Bank Governor Atiur Rahman and Whip Shagufta Yasmin, MP attended the function with NBL Managing Director Neaz Ahmed in the chair. Bangladesh Krishi Bank Chairman Khandarker Ibrahim Khaled, NBL Vice President Saidur Rahman and DMD AKM Shafiqur Rahman, Sonali Bank Ltd Director Shuvas Shingh Roy, Munshiganj Deputy Commissioner Azizul Alam and Tongibari upazila Chairman Kazi Wahid, among others, attended the occasion.

News Source: Financial Express/03 Jan 2011

A leading global financial services company has lauded Bangladesh Bank for its monetary intervention activities last year, terming the central bank's policy proactive. In conformity with the declared policy stance, BB's monetary policy operations during the early part of the year remained light fingered rather than heavy handed, said Citi in its annual monetary update.

The BB move did not impede pick-up in output, exports and new investment activities, it said. Purchases of foreign exchange inflows from the market to retain the taka on a slight undervaluation bias for export competitiveness were only partly sterilised by liquidity management operations. "Besides direct liquidity management operations, the permitted open exchange positions of banks were widened. Sectoral credit flows were promoted or discouraged eclectically, while credit flows to under-served productive sectors like agriculture and SMEs were promoted."

The BB policy also discouraged expansion in credit for unproductive ostentation, conspicuous consumption and speculative purposes, according to Citi. However, with the increase in inflationary pressure, the central bank was seen to gradually tighten policy measures. In August 2010, it raised the repo rate from 4.5 percent to 5.5 percent and the reverse repo rate from 2.5 percent to 3.5 percent. Earlier in May, it raised the cash reserve requirement (CRR) by 50 basis points (bps) to 5.5 percent, for the first time since September 2005, to mop up Tk 20 billion of excess liquidity.

In December, the CRR was further raised by 50 bps to 6 percent for the commercial banks to curb inflationary pressure on the economy, the Citi update said. The central bank moves also kept the taka under under depreciation pressure. The BB has regularly intervened in the dollar/taka market to maintain the competitiveness of the exchange rate, curbing tendencies for excessive volatility. The nominal exchange rate remained below 69.60 level until late August, with the BDT depreciating only 0.48 percent against the dollar from the opening level of 69.27.

However, increased demand of the greenback to meet import payments took the dollar/taka rate to break 70 level during late September. The taka depreciated 1.34 percent in September alone. With buoyant demand, and the central bank's stance to keep the taka undervalued, dollar/taka rates rose to 70.8450, the highest level during the year, by the end of October. After a moderation in November, the nominal exchange rate started to rise again in December, and hovered near 70.69 levels in direct trading during the middle of the month, registering a depreciation of 2.05 percent over the year.

Call money rates remained stable during most part of the year due mainly to the excess liquidity in the market, which stood slightly lower at Tk 345.0 billion at the end of June 2010, down from Tk 347.6 billion at the end of June 2009. However, the CRR hike in May, and increased seasonal demand ahead of Eid festivals during September and November led call money rates to rise to double-digit levels, the update said. "Although those increases were corrected within a short span of time, the second CRR hike of the year in December led the overnight rates to soar significantly."

On December 15, the first day of new cash reserve maintenance, call rates skyrocketed when some private commercial banks sought large funds to meet the reserve requirements. Call money rate rose as high as 180 percent, breaking the earlier record of 150 percent hit on March 30, 2006. However, the rates subsided over the following weeks to settle below 20 percent level. The downward shift in the yield curve during 2009 was reversed last year due to excess liquidity in the banking system, Citi said.

The yields for government securities of all tenors increased from their December 2009 levels. The yields of short-end bills with 91 days, 182 days and 364 days tenor rose by 225 bps, 120 bps and 89 bps respectively. On the other hand, rates of mid- and long-end government bonds with 5 years, 10 years, 15 years and 20 years tenor increased by 20 bps, 75 bps, 43 bps and 35 bps respectively. The increase in yield was highest in the 91 days bill, which added 225 bps. Citi in its update also put focus on international markets and major interest rates.

Central banks of the major economies had slashed rates to historic low levels by the middle of 2009 to push out liquidity to try igniting economic growth, it said. The Bank of England, European Central Bank (ECB), Bank of Canada, Swiss National Bank, Reserve Bank of Australia, Reserve Bank of India, all cut their benchmark rates by 25 to 175 basis points in 2009. The Federal Reserve (Fed) and Bank of Japan (BOJ) had already been at their record low levels of benchmark rates at 0 to 0.25 percent and 0.1 percent respectively after their December, 2008 rate cuts. While the central banks of Australia and Norway started hiking rates from late last year, 2010 witnessed the RBI, the Peoples' Bank of China and the Bank of Canada joining the group.

For most of 2010, the fundamental story behind Euro (EUR), when investors were actually looking at it, was all about sovereign credit risk, Citi said.

News: The Daily Star/03 Jan 2011

Twenty Two (22) organizations of Bangladesh won the tenth Institute of Chartered Accounts of Bangladesh (ICAB) award this year. Based on the accounts and reports of several organizations, published in 2009, ICAB has awarded this award to Bank, non-bank, production, IT and non-governmental organizations. This ceremony took place yesterday evening in the Sheraton Hotel of the capital.

Mr. Abul Mal Abdul Muhit was present in the ceremony as a chief guest. ICAB chair Mr. Jamaluddin Ahmed, assistant chair Mr. Shahjahan Majumder and the chair of evaluation committee Mr. Abu Sayeed delivered their speech to the audience. Finance minister Mr. Abul Mal Abdul Muhit said that several organizations are doing well in making accounts report. He also said that such transparency is needed where money is related. Jamal Uddin Ahmed informed that since 2001 ICBA is presenting this award. As a result organizations put emphasizes on improving economic review of their organizations. This helps to attract foreign investors and make them interested to invest in our country.

Finance Minister distributed crest and certificates to the Chief Executives and senior officers of the organizations, present in the program.

Awarded Organizations in Bank Category: Prime Bank (1st), Eastern Bank (2^nd) and Dutch-Bangla Bank (3rd). Premier Bank, BRAC Bank and National Bank also won the honorary award in the same category. In the non-Banking category Green Delta and Reliance Insurance won the award. Prime Finance and Investment Limited, IDLC and Lanka Bangla also got the award in the same category. In the production sector Glaxo Smith Cline Bangladesh Limited became first. Singer and ACI won the second and third prize.

GrameenPhone was awarded in the communication and IT sector and BRAC became first in the NGO category where Sajeda Foundation and Bureau Bangladesh and Uddipon became second and third. Agrani Bank got this award from Governmental organization. Agrani Bank and Prime Bank also won prizes for corporate discipline and good administration.        

 News Source: Prothom Alo/20 Dec 2010

Bangladesh Electronic Funds Transfer Network (BEFTN) will start function from February 20 next year.

The Bangladesh Bank in a recent circular announced the date of starting the BEFTN activities and asked all participating commercial banks for taking necessary preparation enabling them to conduct transactions through the network.

With the introduction of BEFTN, the fully automated cheque clearing process would be completed in the country. Earlier on October 7 this year, the activities of the Bangladesh Automated Cheque Processing System (BACPS) started at the Dhaka clearing zone.

The activities of this modern high value national payment system have now been expanded at all branches of the central bank across the country.

All the branches of the banks that are members of Dhaka Clearing House are members of the regular value clearing, but the high value service is only activated at few branches of commercial branches at Motijheel and Dilkusha.

This high-value service will be extended to all branches in the city from January 5, next year, according to the Bangladesh Bank circular.

The automated clearing house activities will start in Sylhet on January 20, and in Chittagong on February 3 next year.

The central bank has asked all branches of member banks to send all instruments on clearing to BACPS Data Centre in Dhaka. The net-settlement would be completed through integrating all accounts of participating banks preserved at the central bank.

Bangladesh Bank in partnership with the UK Depart-ment for International Develop-ment (DFID) embarked on a project to modernise Bang-ladesh’s national payments system.

All commercial banks who are members of the Dhaka Clearing House will be required to submit their list of selected branches and to finalise their "point of transaction" for submission of their outward cheque images and data to BACPS and be prepared to handle cheque image and data as part of their inward clearing operations.

Source: Daily-Sun, Bangladesh/20th Dec 2010

The inter-bank call money rate recorded an unprecedented rise at 190 per cent on Sunday, the second day after enforcement of the new cash reserve requirement (CRR) rules for the commercial banks to contain inflation.

The call rates were swinging between 55 and 190 per cent on the day against 50 per cent and 175 per cent a day earlier. However, most of the deals were settled at rates ranging from 100 per cent to 150 per cent, treasury officials said.

One non-bank financial institution borrowed loan at 190 per cent from the inter-bank call money market yesterday, another official also said.

The call money rate rose to 175 per cent on Thursday last, marking a historical high, as some lending banks suddenly raised their call rates to cash in on the liquidity crunch in the market.

Earlier, the call money rate increased up to 150 per cent in 2006 during the BNP-led four party alliance regimes.

The central bank raised CRR by fifty basis points to 6.0 per cent for the commercial banks on December 1 last to help curb inflationary pressure on the economy.

Under the new CRR rules, the banks are required to maintain the reserve at 5.50 per cent instead of 5.0 per cent earlier on daily basis, but the bi-weekly average has to be 6.0 per cent in the end.

An analyst of the Bangladesh Bank said there would a positive impact on inflation due to increase of CRR, which would help decline prices of local commodities during December-January period.

The declining trend of food prices has already contributed to a drop in inflation, which slipped to 6.86 per cent in October from 7.61 per cent in September, according to the official data of the Bangladesh Bureau of Statistic which released on Sunday.

The food inflation decreased to 8.43 per cent in October from 9.72 per cent in September.

Director General of Bangladesh Institute of Bank Management Dr Toufic A Chowdhury told daily sun that the call money rates surged to another historical high due to lack of proper liquidity management by the local banks.

“Most of the commercial banks have invested their funds in the share markets for quick gains, but those were blocked as the share prices fell sharply during the past two weeks,” he added.

The historic high in call money rate on Sunday was mainly due to aggressive dealings by few banks, managing director of Pubali Bank Limited Helal Ahmed Chowdhury told daily sun Sunday evening.

He also said that the Bangladesh Bank should set a ceiling for call money rate as the local market has remained volatile for last few days.

“Higher call money rate may push the interest rates on deposits up in the near future to meet the growing demand for liquidity and as a result the banks are raising the interest rates to attract more deposits from their clients,” he added .

The Bangladesh Bank injected Tk 32.79 billion in the money market under a special repurchase agreement (Repo) on Sunday, which seemed to be inadequate, fund managers said. The total demand for money in the call money market stood at Tk 120 billion on Sunday.

Source: Daily-Sun, Bangladesh/20th Dec 2010