Rejaul Karim Byron

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The central bank yesterday asked commercial banks to bring down their credit-deposit ratio by June 30.

General banks will have to cut down the ratio to 85 percent, while Islamic banks to 90 percent, according to a Bangladesh Bank (BB) directive.

At a meeting with Deputy Governor Nazrul Huda in the chair, the central bank issued a warning to the banks that they can no longer provide "any purpose loans". It also said no banks can collect deposits by offering aggressive interest rates.

If any bank fails to abide by the rules, it will face legal action.

BB held the meeting with 24 banks whose credit-deposit ratio was more than 85 percent till February 4. Of them, 18 are general commercial banks and the rest Islamic banks. The central bank said the directives will be sent to all the banks subsequently.

BB told the meeting that in 2011 the prime objective of the banks will be to ensure stability, while profit earning will be a secondary priority.

BB Monetary Policy Statement (MPS) published on January 30 showed a stringent attitude towards the banks' laxity in credit management and the fresh ultimatum was issued to them in the same tone.

Central bank Executive Director SK Sur Chowdhury and chief executive officers of the banks were present.

At the meeting, BB placed a report which showed that the average credit growth of the banks was 29 percent but the deposit growth was 22 percent, which pointed to flaws in the banks' fund management.

BB asked the banks to submit an action plan on how they will bring down the credit-deposit ratio by the next week. The central bank will monitor the banks' performance every month.

A BB official said if any bank fails to bring down the ratio by the deadline, punitive action will be taken against the bank including non-issuance of new licence to open new branch and its CAMELS (capital adequacy, asset quality, management, earning, liquidity and sensitivity.) rating will also be poor.

In the MPS, the central bank said a faster credit growth compared with the deposit growth indicated a slack attitude of banks through the second half last year in expanding lending commitments.

Slow growth of time deposits than demand deposits (20.6 percent and 42.4 percent year-on-year growth in November 2010 respectively) signified high liquidity preference among the public, presumably for engagements in the capital market, evidenced by hectic trading at the stock exchange.

According to BB, in 2010 the credit-deposit ratio for private banks was 89 percent, which was 73 percent in state banks and 83 percent in foreign banks.

The banks are allowed to lend up to 82 percent after maintaining a statutory liquidity requirement against deposits. If any bank wants to go for aggressive banking, it can raise the ratio to 85 percent by adding capital alongside deposits.

It was revealed that 20 out of 30 private banks lend up to 85 percent against deposits. Some banks lend more than 100 percent, which means they lend by borrowing from the call-money market at higher interest rates.

Lending growth of 30 out of 43 local and foreign commercial banks was found to be much higher than their deposit growth.

Bankers said banks cannot lend more than their deposit.

The BB officials said the banks went into risky banking to make high profits overnight. Recently, the banks made most of such investments in the stockmarket to take returns on investment.

The MPS said BB has initiated necessary corrective and preventive supervisory steps against lending discipline lapses.

In the backdrop of skyrocketing real estate prices, banks were asked in April 2010 not to extend loans for land purchase. Compliance surveillance on permitted ceiling of holding of capital market assets by banks was tightened in June 2010.

In October, general provisioning requirement on bank loans against stocks and shares was doubled to 2 percent. In December, 50 percent margin requirement was made mandatory on all consumer financing.

News: The Daily Star/ Bangladesh/ Feb-21-2011

The World Bank (WB) will provide Tk 250 crore for the Bangladesh part of the Sundarbans under a project, Strengthening Regional Co-operation for Wildlife Conservation (SRCWC). Anderson, vice-president of WB’s sustainable development wing told state minister for environment and forest Dr Hasan Mahmud during a meeting at his secretariat office on Saturday.
Bangladesh, India, Nepal and Bhutan have taken up such projects. Appreciating Bangladesh's steps on conservation of tigers, to increase their population under the Tiger Action Plan funded by the WB, Anderson said, the bank will continue its assistance for the purpose.
She also assured the state minister of the WB assistance on the ‘Dhaka Environment Workers Project' (DEWP). Prevention of water contamination of the surrounding rivers of the capital, establishment of a control room at the department of environment and setting up of   cluster of effluent treatment plants in the industrial areas would come under the DEWP, Inger said.
The WB, vice-president further told Dr Hasan that the WB would also provide assistance on development of Bangladesh's 'carbon positive agriculture'.
Thanking thanks to WB's vice-president Inger, the state minister said, “The WB is playing a vital role in conservation of environment and wildlife in Bangladesh.”
Later, the visiting WB official called on food and disaster management minister Dr MA Razzaque at his secre-tariat office.

News: The Independent/ Bangladesh/ Feb-21-2011

Bank Asia arranged its ‘Annual Conference 2011’ at a city hotel recently.

A Rouf Chowdhury, chairman of the bank, inaugurated the conference at Pan Pacific Sonargaon Hotel as the chief guest, said a press release.

Vice Chairman Mohammed Lakiotullah, Erfanuddin Ahmed, president and managing director of the bank, Rumee A Hossain, chairman of Audit Committee, Directors---AM Nurul Islam, Mashiur Rahman, Shah Mohammad Nurul Alam, Nafees Khundker and Faisal Samad were also present on the occasion.

The conference made a critical review of bank’s activities in the ending year. Based on the experiences of the previous year, strategies and action plans were also set up at the conference to face the challenges ahead, the news release added.

Importance was also laid on optimal utilisation of the bank’s resources and enhancement of the standard of customer services.

News: Daily Sun/ Bangladesh/ Feb-2011

Bangladesh Bank (BB) is to provide potential entrepreneurs with adequate financial assistance for setting up agro-processing industry in the Chittagong Hill Tract (CHT).

The central bank is ready to help develop agro-processing industry in the CHT area for the benefit of the farmers who produce large amount of fruit, vegetables and other perishable goods every year, the BB Governor Dr Atiur Rahman told BSS in an exclusive interview. The governor, who came to the hill district last week to inaugurate the first ever conference of the ginger and turmeric producers of the country, told BSS that the central bank was ready to finance agro-processing industry.

“But potential entrepreneurs should come forward first,” he said.

Hundreds of farmers in the three hill districts produce plenty of pineapple, orange, banana, papaya, jackfruit and mango every year, but do not get fair prices of the perishable produces only because of lack of proper marketing facilities.

Apart from these fruit and vegetable, a large number of farmers in the area are now producing some major spices including ginger and turmeric, which are meeting around one-forth of the local demands.

The farmers in this area believe that they would get proper prices of their produces with development of agro-processing industry and proper marketing chain.

News: Daily Sun/ Bangladesh/ Feb-2011

IFIC Bank Ltd recently signed a Memorandum of Understanding (MOU) with PRAN-RFL Group for providing banking facilities to PRAN Group.

Fariduddin Al Mahmood, executive vice president and head of Corporate Banking and Marketing of IFIC Bank, Ms. Uzma Chowdhury, director for Finance of PRAN-RFL Group, signed the agreement on behalf of respective sides, said a press release.

Mohammad Abdullah, managing director of IFIC, Deputy Managing Directors Zaitun Sayef and Mati-ul-Hasan, other high officials of the bank and PRAN-RFL Group, were also present during the agreement signing.

News: Daily Sun/ Bangladesh/ Feb-2011