Bangladesh Bank has prepared data about letters of credit of five banks to help an anti-draft body investigation into suspected money laundering cases in the name of imports.

Anti-Corruption Commission (ACC) launched the enquiry in October last year and sought the data of a 10-month period from July 2012.

The anti-draft body began the probe as there was an “abnormal increase” of capital machinery imports when the country was experiencing dull investment situation due to a long-lasting political turmoil.

Bangladesh Bank sent a letter to the ACC on Tuesday citing that the data is ready and can be collected in hard version.

The banks include state-owned Agrani, Janata and Rupali, private commercial Islami Bank and foreign HSBC.

The central bank prepared data of five banks in the July-April period last fiscal year.

Bangladesh Bank sources said the LC opening for capital machinery imports increased 31.6% in 10 months from one year ago although the period was identified as politically instable and sluggish for investment sector.

In November last year, the committee asked the central bank for the data.

According to the data, LCs to import capital machinery increased to $2.36bn during the period compared to $1.72bn one year earlier.

In the period, textile machinery imports showed a substantial increase by 14% to $373m, garment machinery 34% to $366.65m and power sector machinery 301% to $696m.

Although the ACC asked for 10 months data, Bangladesh Bank found the December data of 2013 of two banks also fishy when the capital machinery imports witnessed 300% rise.

The banks are Janata Bank and Dhaka Bank.

Of the December data, the central bank found $230m LCs of Janata Bank and $18m of Dhaka Bank suspicious, which were opened for capital machinery imports for energy sector.

Bangladesh Bank asked the two banks to provide information to investigate into if there is any case of money laundering in the name of imports.

The central bank executives said the rise of capital machinery imports was not normal as the entrepreneurs had remained shy of making any fresh investment during political instability centering January 5 elections.

According to them, ill attempts were being made through over-invoicing.

They said although the imported machineries were second hand and cheap, they were shown new and expensive in the invoices.

News:Dhaka Tribune/30-Jan-2014

The new monetary policy for the second half of the current fiscal year will boost investments and business activities that were severely hurt by political unrest in the past few months, Bangladesh Bank said yesterday.
The central bank also said it would go on with a cautious stance to ensure macroeconomic stability and contain government borrowing and inflationary pressure.
BB Governor Atiur Rahman announced the half-yearly Monetary Policy Statement (MPS) at his office in the city.
“We have kept the structure of this policy the same with the previous one, but many new initiatives have been included this time to help the economy recover,” the governor said.
BB Chief Economist Hassan Zaman said the monetary policy framework seeks to reduce inflation while at the same time leaves sufficient space for a recovery in credit demand in the second half.
“In addition, we are using macro-prudential and other policies to provide various temporary breaks to the businesses affected by the disruptions of the last few months so that the growth momentum can resume.”
The MPS said the central bank would continue to focus on achieving its inflation targets while providing sufficient space in its monetary programme for lending to activities which support broad-based investment and inclusive growth objectives.
"The BB will use both monetary and financial sector policy instruments to achieve its goal on inflation as well as ensure credit growth which is sufficient to stimulate inclusive economic growth."
The central bank would target bringing down the average inflation rate to 7 percent.
But the persisting inflationary pressures over the past few months with the risks ahead related to the inflation outlook imply that achieving the inflation target will be challenging. As such the BB has decided to keep policy rates unchanged.
The statement said, as there is ample liquidity in the banking system, an easing of reserve requirement ratios is also unnecessary.
Limiting government borrowing from the banking sector is important for achieving inflation targets and providing the space for banks to lend to the private sector.
Unanticipated spending pressures arising from the provision of 'incentive packages' to various industries affected by recent disruptions will be accommodated within the sizeable of Tk 26,000 crore borrowing limit, the MPS said.
“This is likely to be possible given the low borrowing levels in the first half.”

The central bank slightly revised up its forecast for the growth in gross domestic product (GDP) to 5.8 percent-6.1 percent for the current fiscal year, from 5.7 percent-6 percent earlier.
It said, due to sluggish services and construction sectors and negative growth in remittances resulting in lower aggregate demand, the economy will grow by closer to 6 percent in the current fiscal year if there is no major disruption in the remaining months.
Though the government had targeted a 7.2 percent GDP growth at the beginning of the current fiscal year, Finance Minister AMA Muhith has recently hinted to bring down the target to 6.3 percent.
To achieve the desired GDP growth, the BB has set a target for private sector credit growth at 16.5 percent, though the growth was 11.1 percent in November.
"This level is sufficient to accommodate any substantial rise in investment and trade-finance over the next six months."
"BB views these figures as indicative ceilings -- banks continue to be advised to lend only to creditworthy clients for productive purposes and whether this ceiling is reached or not depends ultimately on investor appetite and the bank's assessment of project viability."
The monetary policy also aims to further consolidate the country's external sector stability.
The central bank anticipates further build-up in foreign reserves in the second half of the current fiscal year though at a more moderate pace than the first half due to the balance of payments assumptions.
While the decline in remittances will not adversely affect external stability, it is imperative that manpower exports resume its growth, so that remittances can be an important part of medium-term external balance.
The BB will continue to support a market-based exchange rate while seeking to avoid excessive foreign exchange rate volatility.
Average inflation rose from 6.99 percent to 7.53 percent in the second half of the fiscal year driven by higher food prices.
Domestic retail interest rates declined during the first half due to lower cost of funds for banks, lower demand for credit as well as due to increasing competition from overseas lenders whose lending rates are in single digits.
The central bank also said it would continue to collaborate with Bangladesh Securities and Exchange Commission to stabilise the stockmarket.
The BB is launching a new Tk 200 crore refinancing facility to stimulate entrepreneurship among low income rural households who have opened Tk 10 accounts. The initiative will be implemented by micro-finance institutions.
The central bank will increase the size of the Export Development Fund if the current $1 billion fund is fully utilised, according to the MPS.

News:The Daily Star/28-Jan-2014

Bangladesh Bank (BB) will continue to collaborate with Bangladesh Securities and Exchange Commission (BSEC) in stabilizing the capital market, said Governor Dr Atiur Rahman on Monday.

“While not directly under the purview of BB, various monetary and financial sector related actions have contributed to stabilizing the capital market, and BB will continue to collaborate with BSEC in this regard,” he said while announcing monetary policy for the second half of the current fiscal year (H2FY14).

He said the BB would continue to encourage larger borrowers to access the capital market as banks will need to comply with the recently revised regulation on single borrower exposure limits for business groups.

“BB will continue to encourage larger borrowers to access the capital market given single borrower exposure limits for banks,” he said.

While primarily an SEC issue, the BB will be supportive of the capital market through ongoing deeper regulatory coordination and policy support, Atiur said. Moreover, in order to fill the gaps in the financial landscape, the BB will facilitate the role of private equity/venture capital sources of finance, he added.

Effective transmission of monetary policy requires strengthening credit and debt markets and this will remain a key focus for H2FY14, the governor said, adding that in order to spur secondary market activity the BB has recently embarked on secondary trading in Treasury bonds and will continue to do so in H2FY14.

He said devolvement of these securities has also fallen from 34 per cent in FY13 to 26 per cent in H1FY14 and this trend is expected to continue in H2FY14.

A new Islamic bond of three months’ tenure is expected in H2FY14 which will contribute to better liquidity management of Islamic banks, the governor added.

News:Daily Sun/28-Jan-2014

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has said investment and domestic economic activities are largely affected due to prevailing high interest rates of bank loan. The cost of importing capital machinery and raw materials are also being affected due to higher interest rates of bank loan, the country’s apex trade body made the observations in its quarterly (July to September) published magazine “FBCCI Business News.”
Along with the limitation of infrastructure and ongoing political stalemate, high interest rates of bank loan are hampering the industrialisation and investment of the country, it said. “It is very difficult for any businessman to ensure profitability with high interest rate where lack of infrastructure limitation exists,” it added.
Currently, the interest rates varies from 16 to 19 per cent where additional service charges are taken without proper justification, it pointed out.
“Though different steps have been taken to overcome the problems of infrastructures, no serious attention is being given to lower the interest rate,” it said adding that it was the long-wanted demand of the business community in Bangladesh to reduce the current lending rates for the greater interest of economic development of the country. The prevailing high interest rates of bank loan are leading the local businessmen and entrepreneurs to lose their business competitiveness in the international market compared with the neighbouring countries, the editorial said.
The rates prevailing in the neighbouring countries are apparently much lower, it said and added that thus, it provides a cutting edge in supplying their products to Bangladesh.
It would be very difficult to lower the interest rate until policy decisions were take adequately to overcome the crux of the problems, the FBCCI said.
At present, the banks are holding excess funds and could not lend the excess funds as businesses were reluctant to take loans at high rates, it said.
Besides, the current political situation merged with rising violence in the name of hartal was also creating bottlenecks for the business to shy away from further borrowing and investment in the country, the FBCCI said and opined that the government should come up with a solution to make the interest rates affordable.

News:Daily Independent/25-Nov-2013

Asif Showkat Kallol

Although the prime minister has approved a new pay scale for Bangladesh Bank and four state-owned commercial banks three weeks before, implementation of it faces a fresh hurdle.

The government now finds no law under which a separate pay scale for the four state-owned banks could be materialised, said official sources.

In Bangladesh, the pay scales of any government offices are executed under the Services (Reorganisation and Conditions) Act, 1975.

But the state-owned commercial banks were made public limited companies in 2007 and remain outside the purview of the Services Act.

Finance Secretary was given the responsibility of ownership of those banks that include Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank.

Rupali Bank has a 9% private ownership.

“There is no law for the pay-scale of the state-owned commercial banks. Finance Secretary has already been informed about it,” said a senior official at pay-scale implementation division at the finance ministry on Saturday.

Early this month, a government committee led by cabinet secretary Musharraf Hossain Bhuiyan had submitted a proposal on a separate pay scale for the banks.

The new pay scale was then approved by the prime minister with increase in the employees’ basic salaries.

Under the new 11-grade pay scale, which will replace the existing 20-grade pay structure, the basic salary for those in the lowest grade will be Tk6,000 and Tk55,000 for the highest grade.

After a meeting with cabinet division on 14th this month, finance minister AMA Muhith told the journalists that the government would issue an order on the new pay scale just the following week.

Meanwhile, Bangladesh Bank governor Dr Atiur Rahman described the PM’s approval to new pay scale as an achievement for the central bank and the state-run commercial banks.

The scale separated the banks’ pay scale from the national pay scale.

“After the government issues order in this regard, I will take matter to the central bank’s board,” said Dr Atiur Rahman. 

News:Dhaka Tribune/24-Nov-2013