The crisis at Kingfisher Airlines escalated further with the Service Tax department here freezing as many as 40 bank accounts of the already crippled airline for non-payment of dues to the tune of Rs 400 million.

“Over Thursday and Friday, we froze 40 bank accounts of Kingfisher Airlines. They failed to meet the February 29 deadline to make the payments. The airline owes Rs 400 million to the department,” Service Tax Commissioner S.K. Solanki told PTI on Saturday.

This is the fourth time in the past four months that the service tax depart has frozen its bank accounts. Late last month, the income tax department had also frozen the bank accounts for not depositing the TDS.

Asked if the airline had communicated with the department, he said, “Not yet as today being a Saturday. We hope to hear from them on Monday.”

The move follows as the airline failed to make Rs 200 million payment by February 29, as promised. However, Kingfisher spokesperson could not be immediately reached for comments.

The airline was given time till February 29 to clear part payment and March 31 to pay off all the arrears to the tune of Rs 700 million.

Since the account was frozen first time in early November last, the airline had paid only a little over Rs 300 million, Mr. Solanki said.

It had paid Rs 100 million in December, after its accounts were frozen in the early that month; Rs 200 million in January and they had promised to pay Rs 200 million in February.

Chairman of the Central Board of Excise and Customs, under which the service tax department falls, S.K. Goel had on February 22 said the airline had to clear this indirect tax dues of Rs 700 million before March 31.

“Kingfisher has an outstanding service tax dues of Rs 700 million and the company had promised to pay in instalments,” Mr. Goel had said in New Delhi.

The beleaguered airline has been in a financial mess and is unable to meet its obligations, including paying salaries to its employees, for months on end now.

Following continuous non-payment of salaries, late last week a section of its engineers went on a ‘tools-down’ protest for a day. This came even as airline chairman Vijay Mallya in an internal communication towards the middle of last week had promised to clear all the salary arrears at the earliest saying he had made arrangements for that.

As crisis deepened and salaries did not come by, its employees left the crippled organisation en-masse, especially the most critical pilots. Over 60 pilots have left so far in the past few months alone.

As pilots left and the cash flow turned dry, the airline massively reduced its flights beginning mid-October. From 400 flights a day, it is operating only 170 flights now, using just 28 of its 64 fleet.

The airline, which never made a profit since its inception in May 2005, reported a net loss of Rs 4.4426 billion in the December quarter, due to high fuel costs and weaker rupee, up from Rs 2.5369 billion a year ago.

The airline suffered a loss of Rs 10.27 billion in 2010-11 and has a debt of Rs 70.5708 billion in its books apart from over Rs 40 billion of accumulated losses and a restructured long-term loan of around Rs 70 billion.

The Daily Sun/Bangladesh/ 4th March 2012

The central bank has proposed extensive amendments to the banking law, including changes to the definition of default loan and lenders' involvement in the capital market, to ensure better governance in the sector.

A finance ministry official said the central bank sent the 75-page proposal to the Banking Division early this month.

In line with the proposal, Bangladesh Bank (BB) will have to have the right to make public any information regarding loan defaulters in any form.

The existing law does not explicitly allow this disclosure.

The official said the government will form a committee led by a former secretary or additional secretary to scrutinise the BB proposal.

The committee will also include representatives from different ministries and the business community.

The initiative to amend the Banking Companies Act was taken during the immediate past tenure of the BNP government, but it could not be realised due to opposition by various influential quarters.

Even during the immediate past caretaker government, a law was promulgated through an ordinance but after the present government assumed power the ordinance did not get passage in parliament.

Former deputy governor of the central bank Nazrul Huda was actively involved with the formulation of the draft law when it was first introduced in 1991. He was also closely related with the amendment process.

Huda said the world economic system went through a lot of changes in recent times. In light of that, the amendments to the Banking Companies Act are essential, he said.

As per international standard, Bangladesh's banking sector requires to include the new amendments to combat risk. The amendments will also ensure good governance in the banks, he added.

As per the existing rules, if any loan remains overdue for six months, it is identified as default loan. The proposal said the BB will have the powers to redefine the word “default” as and when needed.

Also the definition of borrower will be widened to include guarantor in case the principal borrower defaults. The amended law will give highest emphasis on capital maintenance.

According to the new law, if any bank fails to maintain a minimum paid-up capital and statutory reserve for a long period, it may be closed down.

In case of banking, if any bank fails to comply with the international best practices, heavy fines, restrictions on new deposits, credits or branches will be imposed.

A new clause has also been proposed prohibiting commercial banks to engage in brokerage house, portfolio manager, and merchant banking business, or businesses that require licences from Securities and Exchange Commission.

The amended law will provide that two independent directors will replace depositor-directors. The number of directors in the board will be a maximum of 13.

If any family holds more than 5 percent share, it will have two directors and if the amount of share a family holds is less than 5 percent it will get one director, according to the proposed amendments.

If a director of a bank fails to repay loans taken from any bank or financial institution, he or she will be barred from selling the shares he or she holds until the defaulted loan is paid off. Legal challenges against any actions taken under this clause can only be lodged in a relatively higher court.

In case of subsidiary companies, specific legal provision has been suggested so that commercial banks can form subsidiaries to engage in stock brokerage or merchant banking business with prior approval of the central bank.

The definition of share-holding has been streamlined to avoid ambiguities. Several caps have been introduced to limit the exposure of banks in the capital market, including overall portfolio exposure limit of 25 percent of the banks' capital. At present the exposure limit is 10 percent of the liabilities.

The Daily Star/Bangladesh/ 4th March 2012

Speakers at the workshop on Operation Risk and Anti Money Laundering Act organised by Eastern Bank Ltd in Dhaka recently.

Eastern Bank Limited (EBL) organized a feedback session on "Operation Risk & Anti Money Laundering Act'' for their staffs at conference room of Metropolitan Chamber of Commerce & Industry, Dhaka recently.

A total of 69 Branch Anti Money Laundering Compliance Officers and Customer Service Managers-Operation of EBL participated in the workshop. M Mahfuzur Rahman, Executive Director, Bangladesh Bank was present as the chief guest.

The day long session was conducted by EBL Head of Operation Risk, Internal Control & Compliance Mohammad Musa and Head of Compliance and Legal Unit-ICCD Mohammad Shahjahan Ali.

Head of Internal Control & Compliance Mahbubul Alam Tayiab, Head of Human Resources Department Sirajul Islam, Head of Operation Risk, SD-ICCD Md. Abdul Awal, Head of Audit Md. Rezaul Islam of EBL were also present in the workshop.

Financial Express/Bangladesh/ 1st March 2012

Islami Bank Bangladesh Limited (IBBL) shared responsibilities of financial support to four families of the martyred army officers in the Pilkhana carnage amounting Tk 40,000 per month for each family totaling Tk 1 crore 92 lakh for ten years.

Prime Minister Sheikh Hasina handed over cheque for Tk 19 lakh and 20 thousand of fourth year to the four army officers’ families on February 29 at the Gono Bhaban in the city, says a press release.

Prof Abu Nasser Muhammad Abduz Zaher, chairman, board of directors and Mohammad Abdul Mannan, managing director of IBBL were present on the occasion.

Abul Kalam Azad, press secretary of Prime Minister, chiefs of the three services and officials of Bangladesh Association of Banks (BAB) were also present on the occasion.

The Independent/Bangladesh/ 1st March 2012

The central bank on Wednesday imposed restriction on commercial banks regarding changes in deposit and lending rates. It also asked all the scheduled banks to go by the directives to keep deposit rates within 12.5 percent and lending rate 15.50 percent respectively.

In a circular, Bangladesh Bank (BB) said from now on, scheduled banks could alter the rate of interest for lending and deposit for once a  month.

Earlier, in a single month, banks could alter the rate of interest for multiple times on the basis of nature of investment and volume and period of deposit.

The ABB (Association of Bankers, Bangladesh) leaders in early February had reached consensus on interest rate for deposits at a maximum of 12.50 per cent and fixed the lending rate at a maximum of 15.50 per cent.

A BB investigation found that some banks have offered the interest rate for deposit more than the ABB decision and thus, realising the interest rate higher than the ABB rate. According to the circular, all schedule banks shall obey the ceiling on lending and deposit rates fixed by the ABB while banks shall have to send weekly statements on deposit to the central bank in a prescribed form, which is downloadable from BB website.

The statement must be signed by the chief executive officer of any bank concerned, the circular reads.

The Independent/Bangladesh/ 1st March 2012