The central bank yesterday warned 16 banks against a rise in their classified loans in recent months and asked them to bring down the amount immediately.

The instruction came at a meeting between the Bangladesh Bank (BB) and the Association of Bankers Bangladesh (ABB), a forum of chief executive officers of banks. Governor Dr Atiur Rahman chaired the meeting.

The average rate of classified loans of the country's banking industry is 6.57 percent, but the rate is much higher at some banks.

This type of loan has a high rate of borrower default, and raises the cost of borrowing money for the other customers, according to Investopedia.

“The governor also asked these banks to reduce credit growth, which is on the rise, and to control the advance-deposit ratio in line with the monetary policy stance,” said the managing director of a private commercial bank who was present at the meeting.

The BB found the private sector credit growth increased to 19 percent now from 16 percent last month.

The governor also asked all commercial banks to settle accepted bills between them as per agreements.

Rahman said, recently a bank complained to the BB that four banks (accepting banks of bills) are not paying it the bills.

“We have cut the amount from those four banks and deposited it to the complainant bank,” the governor said in a statement.

Similarly, some other banks made such complaints and six banks have been given 10 days of time to settle those payments, said Rahman.

By accepting the bill or draft, a bank agrees to pay the face value of the obligation if the issuer bank (the drawer of the draft) fails to pay. By lending its name to the transaction, the accepting bank makes it easier for an importer or exporter to obtain trade financing. A bank, once it has accepted a draft, can either hold the paper until maturity or sell it in the money market.

The accepting bank assumes some risk, although in most cases the credit risk is minimal as banks generally deal only with tolerated companies. Maturities on accepted drafts generally range from 30 to 180 days; payment is due at maturity, which usually coincides with delivery of goods to the buyer.

Recently, settlement of accepted bills has been getting delayed by many banks, according to BB officials who are getting a lot of complaints about the issue.

“I welcome the BB move. It would help repatriate money from abroad faster,” said Anis A Khan, managing director of Mutual Trust Bank.

Khan said a committee comprising the bankers was formed several years ago to deal with the issue.

The meeting also discussed interest rates for deposits and lending, anti-money laundering issue and the growing pressure on the primary dealer banks.

The governor asked the CEOs to keep their promises they have made recently on the rates.

The ABB has set the maximum deposit rate at 12.5 percent and lending rate at 15.5 percent in the wake of a rapid rise in the rates after the BB withdrew its cap at the end of last year.

The Daily Star/ Bangladesh/ 31- May-2012

Finance Minister AMA Muhith gives a crest to Bangladesh Bank Governor Atiur Rahman on behalf of Credit and Development Forum at a conference on microfinance at Bangabandhu International Conference Centre in Dhaka yesterday. Sir Fazle Hasan Abed, chairperson of BRAC, is also seen.

Microfinance institutions (MFIs) should not be dependent on an individual to function properly. These should rather create strong institutional structures and succession plans to carry out activities without their founders or leaders.

AMA Muhith, finance minister, Sir Fazle Hasan Abed, founder and chairperson of one of the largest microfinance institutions BRAC, and Qazi Kholiquzzaman Ahmad, chairman of Palli Karma-Sahayak Foundation (PKSF), shared this opinion at a national conference on microfinance yesterday.

Institutional structures should be such that organisations will run well in future even without their founders or initiators, said Muhith at the inauguration of the event.

Credit and Development Forum (CDF), a network on microfinance, organised the programme chaired by Sir Abed of BRAC, world's largest development organisation.

Bangladesh Bank Governor Atiur Rahman also spoke.

Muhith's remark came after PKSF Chairman Ahmad stressed the need for making succession plan of organisations, especially the MFIs.

Abed echoed Muhith and Ahmad, saying that initiatives should be taken to ensure institutionalisation and improve governance of the MFIs.

Institutionalisation will facilitate the MFIs to improve governance and help them come out of the limitations of depending on individuals, said Abed.

The call comes as some quarters doubt over well functioning and the future of Grameen Bank without its founder Nobel laureate Prof Muhammad Yunus. The government removed microfinance campaigner Dr Yunus from the post of managing director of Grameen Bank in March last year.

Muhith said there are cases that organisations could not function properly and carry out their activities after the departure of their initiators.

"It is a curse. We should come out of this circle," he told the gathering of hundreds of microfinance practitioners from the grassroot level at Bangabandhu International Conference Centre.

Muhith's remark came as hundreds of MFIs carry out lending activities for low-income people all over Bangladesh, dubbed as the birthplace of microloans in the world.

Over the past three to four decades, the volume of microloans soared and helped many people come out of poverty and empower women. It has also played a role in mobilising domestic savings.

Currently, two crore families are the clients of microfinance and so far Tk 270,000 crore in loans has been disbursed to these families. At present, these households have Tk 40,000 crore in loans, said CDF Chairman Md Mosharraf Hossain.

Muhith said microfinance is one of the strong tools to reduce poverty. "But sometimes we wrongly term it as the only tool," said the minister, who was also upbeat about the poor borrowers.

"The poor are better borrowers than the rich. They repay loans. They are not like rich men who gobble up funds," he said, adding that default rate of microfinance is only 2-3 percent.

But the percentage of default loans stands at 6-22 percent at conventional banks from where rich people borrow, he said.

"We are proud of the microfinance borrowers," said Muhith, adding that microloan receivers would get loans at 27 percent interest including charges, fixed by Microcredit Regulatory Authority, the regulator.

The minister, however, suggested the MFIs should avoid overlapping and cross-funding. The regulator should take initiative in this regard, he said.

Sir Abed said microfinance has expanded much. But more tasks remain to be done, he said, citing the need to expand micro insurance and pension schemes for the poor.

Abed also wanted the regulator to create mechanism such as a Credit Information Bureau (CIB) of Bangladesh Bank so that the MFIs get credit info of borrowers and avoid lending to the defaulters.

He also demanded the government give permission to set up microcredit banks.

"Time has come for it and there is a need for it. We expect that the government will consider the matter seriously. There are microcredit banks in other countries. It is not clear why such banks will not be set up in Bangladesh," said Abed.

PKSF Chairman Ahmad also backed the idea of establishing microcredit banks.

The Daily Star/ Bangladesh/ 31- May-2012

Bangladesh Bank Governor Atiur Rahman has recently been awarded with the prestigious World No-Tobacco Day Award 2012 by the World Health Organisation in recognition of his significant contribution towards anti-tobacco movements in Bangladesh.

The award will be formally conferred on Rahman on the celebration of World No Tobacco Day today at Osmani Memorial auditorium in the capital.

In his earlier years as an academic and researcher in development economics he all along remained active in civil society campaigns against tobacco use; extensively engaging in writing, media appearances and lobbying efforts with the authorities for policy reforms.

Upon taking over as central bank governor in 2009, he introduced an anti-tobacco growing stance in credit policies, with an advisory circular dissuading banks and financial institutions in Bangladesh from extending credit facilities for growing tobacco.

Simultaneously, he has been promoting a well-orchestrated financial inclusion campaign to ensure that farmers get the needed financing support for shifting to growing other feasible and remunerative alternative crops.

Other awardees from South-East Asia Region are: Late Endang Rahayu Sedyaningsih, Indonesian health minister; Praveen Mishra, secretary for health and population ministry of Nepal; Carlo Fonseka, chairman of the National Authority on Tobacco and Alcohol in Sri Lanka and Cancer Patients Aid Association in India; and Monika Arora, head of the Health Promotion and Tobacco Control, Public Health Foundation of India.

Earlier Rahman also received Sheltech Award (2010) for his outstanding contribution in developing the financial sector of Bangladesh, Indira Gandhi Gold Plaque (2011) in recognition of his contribution to international cooperation towards human progress, and Nawab Bahadur Syed Nawab Ali Chowdhury National Award 2012 by the Nawab Ali Hasan Ali Smriti Sangsad in recognition of his major contribution in banking and finance.

The Daily Star/ Bangladesh/ 31- May-2012

Alhaj Mohammad Hasan, chairman of the executive committee of Shahjalal Islami Bank Limited, presides over a meeting Monday.

The executive committee of Shahjalal Islami Bank Limited held its 485th meeting at the head office of the Bank Monday.

Alhaj Mohammad Hasan, chairman of the executive committee of the Bank presided over the meeting, said a press release.

The members of the committee discussed various issues relating to investment in different sectors.

Chairman of the board of directors Alhaj Anwer Hossain Khan, directors Alhaj Sajjatuz Jumma, Alhaj Akkas Uddin Mollah, Alhaj Engineer Md Towhidur Rahman, Alhaj Mohammed Solaiman, Alhaj Mohiuddin Ahmed, Alhaj Tofazzal Hossain, additional managing director Md. Mukhter Hossain and deputy managing director Md. Abdul Jabber Chowdhury were present.

The Daily Sun/ Bangladesh/ 30th May 2012

Engr. Md. Eskander Ali Khan, chairman of the executive committee of Islami Bank Bangladesh Limited inaugurates a branch of the Bank at Sapahar of Naogaon Monday.

Islami Bank Bangladesh Ltd has opened its 268th branch at Sapahar upazila in Naogaon.

Engr. Md. Eskander Ali Khan, chairman of the executive committee of the Bank inaugurated the branch as chief guest, said a press release.

Deputy managing director Mohammad Shamsul Haque presided over the opening ceremony.

Prof. Mohammad Nazrul Islam, director of the Bank, Alhaj Shahidul Alam Chowdhury, chairman of Sapahar upazila and Md. Abdul Gaffar, chairman of Potnitola upazila chairman were present as special guests.

Md. Shafiqul Mawla, executive vice president of the Bank and head of Bogra Zone delivered welcome speech.

The Daily Sun/ Bangladesh/ 30th May 2012