Bangladesh government ::Borrowed Tk 164-billion loan from banks

The government has borrowed Tk 164-billion loan from banks in the first nine months of the current fiscal starting in July last year. The figure is three times higher than that in the same period of last fiscal, when it stood at Tk 40.23 billion. Finance minister Abul Maal Abdul Muhith admitted that the government’s dependence on bank loan was increasing but hoped it would not exceed the budget estimates at the close of the current financial year (2011-2012). Budget of the current fiscal year has estimated a loan of Tk 189.57 billion from banking system. “The government has to take loan from banks to meet its increasing expenditure and provide money as subsidies since loan sources other than banks have shrunk along with a relative reduction in the flow of foreign loan and donations,” said Muhith. He, however, said steps have been taken to practise restraint in borrowing from banks. Government loan from banks exceeded Tk 220 billion on December 5 last year. On December 1 last year, opposition leader Khaleda Zia said it is unprecedented that the government has borrowed “so much in such a short time, creating famine for the time being in the private sector”. But the loan figure came down to Tk 160 billion after the government received Tk 40 billion from mobile phone operators and used the money for paying back the money borrowed from banks. Since then the government loan from banking system has been ranging from Tk 150 billion to Tk 160 billion. 

According to Bangladesh Bank, Tk 54.82 billion was borrowed from the central bank and Tk 109.15 billion from other commercial banks until March 21 this year. In the last financial year, the government had taken Tk 204 billion loan, which was Tk 20 billion higher than the budget estimates. Analysts hold rental power plants mainly responsible for the increasing bank loan. “The government expenditure has increased due to rental power plants. It is one of the major reasons behind the increasing bank loan,” said former finance adviser to the caretaker government AB Mirza Azizul Islam. “Increasing oil price is causing a rise in import expenditure and creating trade deficit. As a result, pressure is increasing on foreign exchange, making the government dependent on bank loan,” he added.

BRAC BANK ::Paid homage to martyrs of the liberation war.

On the eve of the Independence Day, employees of BRAC Bank paid homage to martyrs of the liberation war. BRAC Bank employees gathered together, hoisted national flag and sang the National Anthem. They placed floral wreathe to makeshift national memorial (Smriti Shoudhu). They also lighted up candles to pay respect to the martyrs and freedom fighters. Mr. Syed Mahbubur Rahman, Managing Director and CEO; Ms. Tahniyat Ahmed Karim, Head of Human Resources; BRAC Bank Limited, and other officials attended the program. Mr. Syed Mahbubur Rahman, Managing Director and CEO of BRAC Bank said, "We are independent today because of the sacrifice of millions of people during the liberation war. We all at BRAC Bank got together here to remember and pay tribute to these valiant souls." "We believe, the fight is still on - but for an economically independent, beautiful Bangladesh," he added.

Credit Risk Management :: Reduction of Investment Risk

Former adviser to caretaker government Syed Manzur Elahi Saturday laid emphasis on proper credit risk management by banks, saying that the size of Bangladesh economy presently stands at US$ 100 billion which could have been double to 200 billion with better management of fund by the commercial banks. “The Credit Risk Management by the banks is significantly important as they are utilizing public money for proving credit for investment,” said Manzur Elahi, also the chairman of Apex Group, while speaking at the inaugural session of the ICC workshop here. International Chamber of Commerce (ICC)-Bangladesh organised the workshop on Credit Risk Management. The rate of Non-Performing Loans (NPL) of the state owned banks are the highest followed by Private Commercial Banks (PCBs) and Foreign Banks (FBs), he said, adding that as a result the liquidity gets affected which is ultimately hampering investment in development projects by the banks. Manzur Elahi appreciated the Bangladesh Bank (BB) Manual of Credit Risk, which, he said, was very comprehensive and if properly followed by banks it would definitely help reduce credit risk. “It will also help better management of fund. Bangladesh Bank should build up more professional capacity and increased manpower to monitor the risk,” he suggested.

 He, however, has apprehension that it would be difficult for the BB to monitor liquidity closely as more banks are entering in the financial market in future. Prof. Mamun Rashid, a noted money market critique, emphasized the need for appropriate tools and mechanism to mitigate the Credit Risk Management as it is not possible to eliminate credit risk totally. He also urges to ensure proper management of Credit Risk as well as best utilization of resources. Prof. Mamun thanked the HSBC Bank for their cooperation to organize the workshop. The workshop will provide participants with an overview of best practices in credit risk management and how to avoid unexpected losses, he said, adding that participants would also be able to benchmark their institution against industry best practices. Emphasis will be given on corporate credit risk management, he added. Johnson Chang, Credit Risk Officer, HSBC Bangladesh, who is also the resource person of the workshop, spoke at the inaugural session. Among others, ICCB Secretary General Ataur Rahman also spoke in the workshop. A total of 68 senior and mid-level executives from banks and financial institutions attended the workshop. A similar workshop will be held in Chittagong on March 25.

Banks ::Analysts stress better fund management

Bangladesh economy presently stands at $100 billion and this could have been double to $200 billion with better management of fund by the commercial banks, said a former caretaker government adviser yesterday. The credit risk management by the banks is significantly important as they are utilising public money for providing credit for investment, said Syed Manzur Elahi, also the chairman of Apex Group. Elahi spoke at the inaugural session of a workshop on credit risk management organised by International Chamber of Commerce (ICC) Bangladesh in the capital, the chamber said in a statement yesterday. He said the rate of non-performing loans of the state owned banks are the highest followed by private commercial banks and foreign banks. As a result, liquidity gets affected, ultimately hampering investment in development project by the banks, he said. Elahi appreciated the Bangladesh Bank manual of credit risk. He said the manual is very comprehensive and if properly followed will definitely reduce credit risk. It will also help better management of fund, he said.

 Elahi further suggested that Bangladesh Bank should build up more professional capacity and increased manpower to monitor the risk provided by the banks. He, however, feared that it will be difficult for the central bank to monitor liquidity closely as more banks are coming in the near future. Mamun Rashid, dean of BRAC Business School and chairman of ICC Bangladesh Standing Committee on Banking, Technique and Practices, emphasised the need for appropriate tools and mechanism to mitigate credit risk management. Johnson Chang, credit risk officer of HSBC Bangladesh and resource person of the workshop, and Ataur Rahman, ICCB secretary general, also spoke.

LPHU :: Global Campaign

On February 27, 2012, the Lebanese Physical Handicapped Union (LPHU), a grassroots organization based in Lebanon, launched a global campaign to integrate disability rights standards into the World Bank’s Safeguards by sending a letter, signed by 101 organizations and individuals, to the World Bank presidency asking for the mandatory inclusion of disability into the Bank’s operations. This campaign comes as an important step towards consolidating the voices of disability groups and supporting human rights networks to advocate for integrating disability rights into World Bank operations. The letter comes in advance of the World Bank’s Safeguards review process through which the institution will be reviewing its social and environmental Safeguard policies over the upcoming two years.

 The Safeguards are a set of policies designed to protect affected communities and the environment that the Bank and borrowing governments have to adhere to when designing and implementing Bank projects and programs. Given this opportunity, global civil society has begun playing an active role to influence this review process and to push the Bank towards expanding the scope of the review to include such issues as gender, land rights, labor rights and the rights of persons with disabilities. The letter highlights the importance for the World Bank to pursue a systematically inclusive development approach across all its operations. It argues that a Safeguard policy, as opposed to guidelines or best practices, is the best way to guarantee that Bank projects are inclusive in process, design and implementation and that persons with disabilities are involved as equal and active participants in the development process. The signatories argue that as the leading multilateral development institution and a standard-setter for other development institutions, the Bank has a responsibility to uphold the highest social standards.

Standard Chartered Bank :: Whole Sale Clients

Standard Chartered Bank of Bangladesh recently held an exclusive strategy session for wholesale Bank clients, says a press release. The day long strategy session was conducted by V Anantharaman, managing director, co-head, wholesale banking, South Asia and Nirukt Sapru, managing director, head origination and client coverage for growth markets, Standard Chartered Bank. Abrar A Anwar, managing director and head of origination and client coverage, Standard Chartered Bank, Bangladesh moderated the session.

Anantharaman said, “Bangladesh is a major growth market for us and we are committed to take part in the growth story of the country and support our private and public sector clients with our world class solutions. ”The primary objective of the session was to review the country’s macroeconomic indicators and highlight growth opportunities. With a presence in Bangladesh for over 100 years, Standard Chartered is committed towards the overall development of Bangladesh, said the press release adding, the Bank has consistently delivered strong results over the last decade along with the steady growth of the economy.

Bangladesh Bank :: Monitoring Mobile Banking Expansion

Bangladesh Bank (BB) governor Dr Atiur Rahman said the central bank is working to ensure safe and low-cost monetary transaction by expansion of mobile banking services across the country.Dr Atiur said this while inaugurating the mobile banking services of Mercantile Bank Ltd on Thursday. The BB governor said the central bank has given approval to 17 banks till February 16, of which 8 banks have already started mobile banking activities through various branches in cooperation with mobile operators' outlet. Under the mobile banking system, a sender would simply need to deposit money with a bank branch, which has monetary transaction system via mobile, for sending money to a recipient anywhere in the urban or rural areas.

The recipient will receive a SMS (Short Message Service) text regarding withdrawal of money from a nearby bank or a mobile operator's outlet by showing the SMS. "By expansion of mobile banking, monetary flow to the rural areas would increase that would help reducing the discrimination in monetary distribution among people of urban-rural areas. It is safe and low-cost," Atiur said. He said the central bank has issued a circular regarding the mobile banking that clarifies the rules, provisions and empowered banks of legal authorities for monetary transaction. The governor said BB has set up an automated clearing house in its headquarters under Bangladesh Electronic Fund Transfer Network to facilitate all the online banking services.

He said the services customers have been enjoying under online and mobile payment system are delivery of remittance, disbursement of salaries, government allowances for designated clusters of people, monthly pension, utility bill deposition and payment of bills for shopping.

The inaugural function was presided over by Mercantile Bank chairman Abdul Jalil, MP. Among others, Support To Digital Bangladesh's project director (PD) Nazrul Islam Khan, PD of the One Household: One Farm project Prosnato Kumar Roy, vice-chairman of the Bank Morshed Alam and the Bank's other high officials were present. Mercantile Bank officials said primarily the Bank would provide mobile banking services at 788 unions under nine districts through Union Information Centres (UICs). Meanwhile, the Bank has signed contact with the managements of 138 UICs.

Bangladesh Bank :: The prospects for approval of a US$1.0 billion support under the ECF

The possibility about enhancement of the government's borrowing from the banking system, beyond its original budgetary target, has emerged as a major irritant during the discussions with the International Monetary Fund (IMF), clouding the prospects for approval of a US$1.0 billion support under the Extended Credit Facility (ECF) of the Fund.

"The government informed the visiting IMF mission about its willingness to raise bank borrowing up to Tk 257 billion for the fiscal year (FY) 2011-2012 exceeding its original budgetary target at Tk 189.57 billion, to finance its fiscal deficit," a senior official, who is closely involved in the negotiations with the ECF for ECF funding, informed the FE.

The budgetary target for government's borrowing from the banking system was originally set at an aggregate level of Tk 189.57 billion through issuing treasury bills (T-bills) and bonds, for FY12.

"The IMF mission which has just completed its negotiations in Dhaka with the authorities concerned will submit a report to their headquarters in Washington, apprising the latter of the country's latest overall economic situation. The report will be considered by the IMF board of directors in its next meeting for deciding on Bangladesh's request for ECF support," another official said.

The government's net borrowing from banking system stood at Tk 156.36 billion so far until February 14, 2012, in fiscal '11-12 as against Tk 19.64 billion during the same period of fiscal '10-11, according to the central bank statistics.


"We've fulfilled most of the conditions, set by the IMF for approval of the ECF support to Bangladesh," the official said in response to a query.


The IMF earlier set 16 conditions, including increase of fuel prices, withdrawal of the cap on the lending rates and raising the interest rate on repurchase agreement (REPO).


The IMF team from Washington visited Dhaka during the second week of this month. The Bangladesh government will need to fulfill the conditions under the agreed commitments to avail itself of the IMF soft loan facility, sources said.

"With timely progress on these and other agreed commitments, the Bangladesh authorities expect to reach an ad referendum agreement with the IMF on an ECF arrangement in the near future," the IMF said in a statement from Washington DC on Wednesday.

"Much focus was placed on measures needed to address fiscal pressures, which stem mainly from rising fuel imports and associated subsidy costs, and to move forward on a new value-added tax (VAT) law, as a key plank of the reform program," it noted.

David Cowen, head of the IMF mission to Bangladesh, said in the statement that constructive discussions were held with the Bangladesh authorities on an economic reform programme for which they are seeking support under the ECF.

In this context, discussions centered on the authorities' plans to undertake sustained macroeconomic stabilization measures and supportive structural reforms aimed at reducing external and fiscal imbalances, rebuilding a foreign reserve buffer, and putting Bangladesh on a higher sustained growth path, according to the statement.

"In support, the authorities have taken a number of upfront measures to address macroeconomic pressures currently confronting Bangladesh. Foremost, greater exchange rate and interest rate flexibility is being allowed, helping to absorb external pressures and transmit necessary monetary policy tightening, in line with achieving program objectives," the IMF said.

Discussions also centered on adopting an appropriately restrained fiscal policy, ensuring a continued sound debt management strategy, and undertaking growth-critical reforms in tax policy and administration, public financial management, the banking and financial sectors, and trade and investment policies, it added.

The government had sought the credit to improve the country's overall balance of payments (BoP) situation which entered the negative territory in fiscal year (FY) 2010-2011 after a decade due to widening trade gap, lower growth of remittances and deficit balance in the financial account.

The BoP has recorded a deficit of $998 million during the July-December period of the FY12 from the deficit of $268 million in the corresponding period in the previous fiscal, according to the central bank statistics.

Meanwhile, the government has already formed a six-member committee to finalise the draft VAT law. The committee is expected to give its report at the earliest for enhancement of a new piece of legislation by Jatiya Sangsad (JS). The proposed law is expected to be placed before the JS (parliament) by the middle of June 2012.

Under the earlier agreed commitments, the amendment of the existing VAT law is one of the major conditions under a time-based implementation framework for approval and disbursement of ECF fund by the IMF in tranches

Banking Industry ::Accepting RBA Comment

The banking industry has welcomed comments from the central bank acknowledging their rising funding costs in the wake of the euro zone debt crisis. Australian Bankers' Association (ABA) chief executive Steven Munchenberg said the comments provided some explanation of why Australia's four major banks had decided to raise interest rates, after the RBA kept the cash rate on hold. 'Banks understand there is a lot of concern in the community that some banks have moved their mortgage and small business interest rates independently of movements in the RBA's official cash rate,' he said. 'For over 10 years banks moved in step with the RBA and that created the reasonable expectation that the RBA cash rate was the only factor determining bank funding costs and the interest rates banks charged. 
 'Unfortunately, the global financial crisis has shown that this is not the case.' Australia's big four banks - Commonwealth, ANZ, National Australia Bank and Westpac - in the past week have all raised the standard variable rate they charge on mortgages, citing the higher cost of sourcing the money. Their decisions have drawn public criticism and raised the ire of federal Treasurer Wayne Swan, who urged borrowers to shop around for a better deal. Speaking at the Bloomberg Seminar in Sydney, RBA Assistant Governor Guy Debelle said banks faced significantly higher borrowing costs as a result of the turmoil in Europe. 'This global repricing of bank debt has clearly affected the Australian banks' wholesale funding costs,' he said. 'Investors are demanding much higher compensation for bank credit risk now than they were in mid-2011.' Increased costs - and their flow through to the lending market - were factors considered by the RBA when assessing the position of Australian markets, Dr Debelle said.

Dhaka Bank :: Given stock dividend and Opened New Branch

The board of directors of Dhaka Bank yesterday recommended five percent cash and 30 percent stock dividend for the year ended on December 31, 2011. The Company has also reported consolidated Earning Per Share (EPS) of Tk 6.25 and consolidated Net Asset Value (NAV) per share of Tk 25.88 for the year ended on December 31, 2011. The company will hold its Annual General Meeting (AGM) on March 29 at Bangabandhu Interna tional Conference Centre in Dhaka. The record date for the entitled dividend has been set on February 28.
Dhaka Bank has opened its 62nd branch with all modern banking facilities including an ATM booth at Jatrabari in the city recently. Mohammed Hanif, sponsor director of Dhaka Bank, formally inaugurated the new branch as chief guest where Reshadur Rahman, chairman of the Bank, was also present, said a press release. Among others, ATM Hayatuzzaman Khan, sponsor director and Altaf Hossain Sarker, former chairman, Khondker Fazle Rashid, director, Niaz Habib, managing director, Neaz Mohammad Khan, additional managing director, Sajjad Hossain, deputy managing director, Arham Masudul Huq, company secretary, along with other high officials of the Bank were also present on the occasion.

Meanwhile, the board of directors of Prime Insurance has also recommended 10 percent stock dividend for the year ended on December 31, 2011. The Company has also reported EPS of Tk 1.90, NAV per share of Tk. 15.17 and NOCFPS of Tk. 0.63 for the year ended on December 31, 2011 The company will hold an AGM on April 18 at Bangladesh Institute of Administration and Management (BIAM) in Dhaka. The record date has been set on March 1 this year.

EXIM BANK :: Organized A Customers' Conference

EXIM Bank organized customers’ conference for its Gulshan, Corporate and Bashun- dhra branches in the city recently. Md Farid Uddin Ahmed, Managing Director of the Bank was present at the conference as chief guest, said a press release. Among others, Md Abdullah Al Zahir Swapan, member of the board of directors of EXIM Bank, Lt Col. Sirajul Islam, Additional Manging Director, Dr Md Haider Ali Mia, Deputy Managing Dirtector were present.

Trust bank :: Getting Optical fiber Networks

Broad Band Telecom Services Limited (BBTS) -a joint venture of the country’s industrial conglomerate Ispahani Group-- will set up optical fibre network to connect Trust Bank Limited head office with its all branches across the country. To this effect, Mirza Ali Behrouze Ispahani, chairman of BBTS, and Shah A Sarwar, managing director of Trust Bank, singed the agreement on behalf of their respective organisations recently in a city hotel. Under the agreement, BBTS will build a nationwide Wide Area Network (WAN) infrastructure through optical fibre/radio link to connect Trust Bank head office with its all branches and ATM Booths. 

The connectivity will help the Bank’s custonmers save time and cost, which is one step forward to get closure to its valued clients countrywide. Abu Zafar Hedaytul Islam, senior executive vice president and S M Akram Syeed, head of IT from Trust Bank and Syed Samiul Huq, director of BBTS, were also present at the signing ceremony.