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31

BBA Discussion Forum / Loan recovery falters in first quarter

« on: July 31, 2019, 02:55:56 PM »

Banks’ loan recovery in the first quarter of 2019 was 9.68 percent higher than a year earlier, but given the extraordinary rate at which default loans are increasing it seems below par.

Between January and March, banks recovered Tk 2,448 crore bad loans, according to data from the Bangladesh Bank.

Typically, banks go for a strong cash recovery drive towards the year end to clean up their balance sheet and show a flattering full-year picture.

The heightened efforts leave bankers in a relaxed mood in the new year, so they take it easy with their recovery activities in the first quarter, according to Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh, a platform of private banks’ chief executive officers.

But this year, they cannot afford to go slow given the rate at which default loans are racing ahead.

At the end of March, total default loans in the banking sector stood at Tk 110,873 crore, up 18 percent from the previous quarter and 25.15 percent from a year earlier.

The reason for the spiral is that many shunned servicing their loans after they had heard of the central bank’s forthcoming rescheduling policy that had favourable terms for them, according to analysts.

As per the new policy, defaulters will be allowed to reschedule their classified loans by providing only 2 percent down payment instead of existing 10-50 percent.

A maximum of 9 percent interest rate will be charged on the rescheduled loans, which is much lower than the existing interest rate of 12-16 percent.

The tenure for repayment is 10 years with a grace period of one year, which is much longer than the existing duration for most of the loans at present.

Although the BB had announced the extraordinary facilities for defaulters in the second quarter of the year, many of the borrowers were aware of it way in advance, they said.

Besides, the insufficient recovery has also hit the ongoing liquidity crisis in the banking sector, eroding the banks’ capacity to disburse fresh loans, analysts said.

“The bail-out offer for defaulters has created a moral hazard for good borrowers as they can be tempted to turn bad too,” said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

Against the backdrop, loan recovery will be trailing further in the days to come.

And once the grace period ends, the default loan total will rocket and the banks’ feeble recovery efforts will be showed up, said Mansur, also a former economist of the International Monetary Fund.

But Rahman acknow-ledged that the recovery in the first quarter fell short of expectations as the defaulters simply resisted paying in the hope of availing the BB’s new relaxed rescheduling policy.

“The liquidity base of banks would have been strong if the recovery drive got a momentum during the period,” said Rahman, also the managing director of Dhaka Bank. The recovery of default loans is always a tough job and banks should continue the effort round-the-clock, said Shafiqul Alam, managing director of Jamuna Bank.

Many lenders tend to give less priority to recovery, focusing solely on business expansion. “But, they have to give the same attention to recovery and business expansion,” he added.
The Daily Star

32

BBA Discussion Forum / BB unveils monetary policy with a word of caution

« on: July 31, 2019, 02:54:21 PM »

The Bangladesh Bank today announced the Monetary Policy Statement for the first half of FY20 cautioning on a couple of near-term domestic risk factors that may hamper attainment of the monetary program objectives.

“If the monsoon flood now engulfing wide expanses of the country prolongs or recurs, agricultural output losses can be significant,” Bangladesh Bank Governor Fazle Kabir told journalists while revealing the monetary policy today.

Ongoing global trade war and geopolitical tensions are uncertainties in the external front that may or may not impair attainment of BB’s FY20 monetary program outcomes, the governor added.

The Bangladesh Bank will be closely monitoring the risk factors to attainment of FY20 monetary program objectives and will address them if the need arises.

The BB’s FY20 monetary policy stance and monetary program will cautiously accommodate monetary and credit expansion needs of all productive pursuits for attaining the FY20 real GDP growth target of 8.2 percent.

They will also keep the CPI inflation contained within the targeted ceiling of 5.5 percent.

“Recent upward revision of fuel gas prices and new VAT law implementation has already imparted some impact on prices in the beginning of FY20 and the lingering effect over the coming month remains to be seen,” he further said.
Source: The Daily Star

33

BBA Discussion Forum / Ethics rather than policing of the internet

« on: March 28, 2019, 11:57:10 AM »

For many people in Australia and New Zealand, the horrific attack on mosques in Christchurch by an Australian national was not totally unexpected. Australia has had a long history of intolerance towards minority groups, ranging back to the genocidal killings conducted against Aboriginal people.

During the past few years, a variety of neo-fascist, anti-Muslim groups have been growing and engaged in noisy protest, often against the building of mosques in the suburbs of major cities, as well as in confrontations with left-wing groups. They are also homophobic and misogynist. In this regard, their intolerance and rejection of a liberal society in favour of authoritarianism have much in common with Muslim extremist views.

But this phenomenon, while restricted to a tiny minority, in an otherwise peaceful environment, is part of a disturbing trend which both stigmatises Muslims and plays into the hands of nationalistic politics. For example, Australian Prime Minister Scott Morrison has now rejected as untrue reports that he urged the then shadow cabinet in 2010 to capitalise on the electorate's growing concerns about Muslim immigration. The Minister for Border Security, Peter Dutton, has constantly raised the spectre of refugees as terrorists. Former prime minister of Australia, Tony Abbott, has now backed down from his controversial 2017 claim that “Islamophobia hasn't killed anyone.” And there are more vile politicians who get plenty of media exposure.

They are easily able to raise the spectre of terrorism. The terrorist attack in Bali in 2002 by Indonesian members of Jemaah Islamiyah, which killed 202 people including 88 Australians and maimed many more, left an indelible mark on Australians, and there have been other local acts of Islamist-inspired terror in Melbourne and Sydney, including a stabbing by a Bangladesh student inspired by ISIS online propaganda. Members of local terrorist cells have been arrested.

Concerns over the growth of cities, crime, the cost of living or problems in employment are inevitably connected to Muslims and terrorism. Virtually no distinction is made between the huge diversity of cultures and practices in the Muslim community. Yet, for all the exaggerations made for electoral purposes, the chance of a terrorist attack is less than that of being killed in a car accident.

In addition, populist print media, including the one national daily, owned by Rupert Murdoch's New Limited, publishes articles about the problem of Islam. Negative headlines and photos are featured on front pages. The same attitude is found on commercial TV programmes and popular radio programmes with huge audiences which exploit community fears and worries.

So, what do we do about the dreadful multiplier effect of social media? First, we need to recognise that there are essentially three forms of social media. The first is represented by the global commercial systems such as Facebook and its subsidiaries which are increasingly demonstrating that they are unable to govern themselves in a way that accords with democratic sentiments. They are driven by commercial greed. Second, there are also profitable online services associated with commercial print media and TV that have large audiences. All are unwilling to accept external governance or supervision, and the government is dependent on their support. Third, there is the “dark web”—networks, applications and platforms which are hidden to the vast majority of us but known to criminals of all sorts (Islamist terrorists and extremists on the right).

We all know, as is the experience in Bangladesh, a government can turn off the internet or mobile phone networks in response to what a government says is an emergency. People have also been charged with unlawful behaviour when, in many other countries, their activity is regarded as legitimate free speech in the interests of a better society. The problem with a heavy-handed approach is that it can interfere in the conduct of everyday life and progressive business and social, cultural or economic development. As another solution, we hear of the use of advanced forms of surveillance to provide better alerts to extremism online, but we all know that systems have a habit of failing or being abused by intelligence agencies. While acceptable in some countries, reports indicate that these products are abused in their application as they are used for purposes other than crime and terrorism prevention.

In my opinion, the solution to online extremism is, in the end, political and ethical. We cannot and should not control the internet as if it was a village water pump, nor is it simply a matter of breaking up the giant companies into smaller parts—the same problems can still occur because the companies and numbers involved will still be massive.

In contrast, it is remarkable that Prime Minister Jacinda Ardern of New Zealand, a woman in her 30s, a digital native, appears to have a new political language of inclusion, and the capacity to shame commercial social media giants.

Perhaps, just perhaps, she will inspire, even lead, younger leaders in other nations to take on the seemingly impossible challenge of challenging the social media giants and their wicked association with intolerance and simplistic commercial imperatives. Higher education and civil society also have a critical role to play here in making this happen.

The study of ethics is neglected in IT education: the technical and commercial outcome is what is regarded as legitimate, rather than the goal of attaining the good and preventing evil. Students (and their teachers) need to be aware of what they are involved with when it comes to the development of social media products or any product that deals with personal data. As an example of this kind of work, at Monash University, we have a cohort of Bangladeshi women doing their PhD with a great concern for the ethical development of the IT for social progress in Bangladesh.

Thus, in Bangladesh or elsewhere, young people who take on jobs working for local technological industries or global social media platforms should be actively conscious of the moral and ethical issues and values that should be designed into social media platforms. They should have values that promote a good society to prevent its hijacking by extremism and unethical commercial imperatives. I also know that NGOs around the world, including those in Bangladesh, feel that they have a role to play in developing more effective public policies rather than a policing environment.

This change is not a dream. The time is ripe for a fundamental change to occur in what social media is, and therein lies an opportunity for this to happen with “digital natives”, inspired by politicians like PM Jacinda Ardern, progressive academicians, and civil society organizations.
The daily Star

34

BBA Discussion Forum / DSE index, turnover lowest in 3 months

« on: March 28, 2019, 11:54:35 AM »

Thin participation of institutional investors brought down both the key index and turnover of the Dhaka Stock Exchange to three-month lows yesterday.

The DSEX, the benchmark index of the premier bourse, fell 27.58 points or 0.49 percent to 5,502.48.

Turnover, another important indicator of the market, dropped 8.39 percent to Tk 353.40 crore -- lowest in the last three and a half months. A liquidity pressure is holding back banks and financial institutions, industry insiders said.

The liquidity crisis is the only weakness in the economy to affect the stock market, according to officials of Bangladesh Securities and Exchange Commission.

Of the traded issues, 121 advanced, 165 declined and 61 closed unchanged on the premier bourse.

Among the major sectors, engineering advanced 0.6 percent while banks and non-bank financial institutions fell 0.9 percent and 1 percent respectively.

British American Tobacco Bangladesh Company (BATBC) dominated the turnover chart with over 58,000 shares worth Tk 26.70 crore changing hands, followed by Monno Ceramics, Square Pharmaceuticals, Singer Bangladesh, and Grameenphone.

Progressive Life Insurance was the day's best performer with a 9.57 percent gain while Vanguard AML BD Finance Mutual Fund One was the worst loser, shedding 6.57 percent.

Top three negative index contributors were BATBC, Square Pharmaceuticals and City Bank, according to data of IDLC Securities. Chattogram stocks also fell yesterday with the bourse's benchmark index, CSCX, declining 25.57 points or 0.24 percent to finish the day at 10,212.82.

Losers beat gainers as 104 declined, 82 advanced and 32 remained unchanged on the port city bourse, which traded 55.17 lakh shares and mutual fund units worth Tk 23.73 crore.
Star Business Report

35

BBA Discussion Forum / Dhaka stocks fall for fifth session

« on: May 09, 2018, 10:58:55 AM »

Stocks fell for the fifth consecutive session yesterday as lower-than-expected dividend declarations by most banks depressed investors.

DSEX, the benchmark index of the premier bourse, declined 41.06 points or 0.72 percent to finish the day at 5,642.46.

Of the 30 listed banks, 16 declared lower dividends than previous year while six announced higher dividends, according to DSE statistics.

The day started in optimism but the buoyancy did not sustain amid a selling spree mainly of large cap stocks, EBL Securities said in its daily market analysis.

“As banks are a major sector, worse-than-expected dividend from the sector affected investor sentiment,” said Mostaque Ahmed Sadeque, president of DSE Brokers Association.

Turnover, another important indicator of the market, also dropped 4 percent to Tk 472.97 crore, with 13.35 crore shares and mutual fund units changing hands on the DSE.

Of the traded issues, 83 advanced, 223 declined and 32 closed unchanged on the premier bourse.

Beximco dominated the turnover chart with 90.85 lakh shares worth Tk 28.37 crore changing hands, followed by Western Marine Shipyard, Square Pharmaceuticals, United Power Generation and Grameenphone. Among the major sectors, textile shares saw a 1.80 percent fall, followed by pharmaceuticals 0.76 percent, engineering 0.71percent, banks 0.63 percent and financial institutions 0.42 percent. Conversely, fuel and power as well as mutual funds increased 1.04 percent and 0.52 percent respectively in market capitalisation. Western Marine Shipyard was the day's best performer with 9.62 percent gain, followed by United Power Generation, SEML Lecture Equity Management and Bangladesh General Insurance Company.

Dulamia Cotton was the worst loser, shedding 6.81 percent followed by Standard Insurance, Queen South Textiles and HR Textile. Chittagong stocks also fell yesterday with the bourse's benchmark index, CSCX, falling 88.99 points or 0.84 percent to finish the day at 10,524.96.

Losers beat gainers as 141 declined, 60 advanced and 31 finished unchanged on the Chittagong Stock Exchange.

The port city bourse traded 73.83 lakh shares and mutual fund units worth Tk 22.31 crore in turnover.
source: Star Business Report

36

BBA Discussion Forum / Both food, non-food inflation declines

« on: May 09, 2018, 10:57:45 AM »

Inflation fell 5 basis points to 5.63 percent in April, compared to the previous month, on the back of a decrease in prices of food and non-food items, according to the Bangladesh Bureau of Statistics.

Last month, food inflation was down 6 basis points to 7.03 percent from a month ago, while non-food inflation declined 2 basis points to 3.49 percent.

Inflation has been on a downward path since October last year except for January when it rose 5 basis points.

Planning Minister AHM Mustafa Kamal released the data yesterday. He said the continuous fall in inflation is a good sign for the economy.

The fall will continue in the next two months and inflation will not increase even in the month of Ramadan, he said, adding that the prices of essentials would not go up in the fasting month.

According to data from the state-run Trading Corporation of Bangladesh, the price of rice went down by about 6 percent in the last one month.

In Dhaka, coarse rice sold for Tk 38 to Tk 42 per kg yesterday, down from Tk 40 to Tk 46 a month ago. Even, the price of coarse rice fell 8 percent from a year ago.

However, the price of finer quality rice is still 16 percent to 20 percent more than what it was a year ago.

According to BBS data, food inflation fell 1 basis point to 6.76 percent in rural areas. However, it decreased 17 basis points to 7.63 percent in urban areas.

In April, non-food inflation dropped 6 basis points to 3.44 percent in rural areas. The urban areas, however, saw an increase of 6 basis points to 3.57 percent.

Kamal also said the crop was damaged by prolonged floods last year. The government had no preparation at that time.

This time, the government has enough stock of food and is selling goods at fair prices.
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source: Star Business Report

37

BBA Discussion Forum / Central bank unveils monetary policy today

« on: January 29, 2018, 04:54:54 PM »

The central bank will announce its second half-year (January - June) monetary policy of the current fiscal today (Monday).

Bangladesh Bank Governor Fazle Kabir will unveil the monetary policy statement (MPS) at a press conference at Bangladesh Bank.

Official sources at the central bank said the new monetary policy will emphasise on continuation of the current policy to support the targeted GDP growth at 7.4 percent by quality credit to encourage investment in productive sector.

"The new MPS will mainly focus on ensuring quality credit," said a top official at Bangladesh Bank.

He mentioned that such emphasis on quality credit is being given because of huge bad loans in the banking sector.

UNB said many economists in the country are critical of the current situation in banking sector against the backdrop of huge non-performing loans as well as bad loan disbursed by some banks.

Centre for Policy Dialogue (CPD), a think-tank, termed 2017 as a year of banking scam.

However, the BB officials hinted that the central bank will not allow any expansionary policy in the coming months as general election is approaching and will take place sometimes at the end of the current calendar year 2018.

The central bank will try to cautiously handle the situation so that spending by candidates in the coming parliamentary election will push up inflation, said a BB official preferring anonymity.
source: The financial express

38

BBA Discussion Forum / Banks under pressure for asset mismatch, liquidity stress

« on: January 29, 2018, 04:53:45 PM »

Banking sector bears some pressures from declining asset quality, particularly of the state-owned banks, and tighter liquidity in some fourth-generation private banks, said the central bank.

The Bangladesh Bank (BB) also indentified downside risks like any shock to remittance inflow and export due to growing political uncertainty in the Middle East.

"Risks to inflation could emerge from the second-round effects of elevated food prices and the pass-through of higher global fuel and commodity prices," it said in the latest Bangladesh Bank Quarterly (BBQ) assessment for July-September 2017, released Monday.

It also said: "High credit growth amid tightening liquidity in the banking system, strong import growth with a smaller overall BoP (balance of payments) balance, and the rising trend in food inflation warrant a cautious macroeconomic management for preserving monetary and financial stability in FY 18."

The central bank, however, predicted that political and macroeconomic conditions are likely to be broadly stable in the fiscal year (FY) 2017-18.

"Strong growth in capital machinery import reflects buoyant investment demand. In the light of the strong economic activities, output growth is expected to be attained at closer to the target," the BBQ explained.

The assessment found the pace of economic activities robust in the first quarter (Q1) of FY 18, aided by rapid private credit growth, a rebound in remittance inflows, and a pickup in export growth.

Focusing on the supply side, it said growth momentum was strong in the industry and the services sectors, while agriculture witnessed a softer growth due to the recent floods.

Inflation, as measured by consumer price index (CPI) on a year-on-year basis, has been on the rise since January 2017, driven mainly by food-price rises.

Consequently, inflation (12-month moving average) crept up, hitting 5.6 percent in the Q1 of the ongoing FY18, slightly exceeding the target of 5.5 per cent.

"Flood-related crop losses, a declining buffer stock of rice, excess demand due to the influx of refugees from Myanmar, and an uptick in food prices on the global market led to elevated food prices on the domestic market," the central bank said explaining the causes of food inflation.

However, non-food inflation eased during the Q1of FY18.

Growth in private-sector credit was on an upturn, having reached 17.9 per cent in September 2017, exceeding BB's FY 18 target. The large share of the credits went in to industry, construction and transport sectors.

Reserve money and broad money (M2) grew by 13.4 and 10.4 percent, respectively, largely in line with the programmed path for December 2017.

However, private credit growth overshot somewhat due to a sharp pickup in lending by the private commercial banks, according to the BBQ.

The central bank also said the gap between credit and deposit growth in a low-interest environment helped absorb the existing excess liquidity in the banking system.

"Liquidity conditions in the banking system remain adequate against the backdrop of stable capital-to-risk weighted asset ratio (CRAR), although non-performing loan (NPL) has slightly increased during the quarter under review," it noted.

The BBQ also says strong import growth (28.4 per cent in the Q1of FY18)-fueled by capital machinery and intermediate goods imports-against 7.7per cent export growth widened trade deficit.

"Wider trade deficit, coupled with improving but modest remittance growth, led to a deficit in overall BoP in the Q1 of FY18," the BB explained.

Fiscal performance improved in the period under review, reflecting an upturn in revenue collection, modest growth in expenditure along with an increased Annual Development Programme (ADP) spending.

"Fiscal deficit inched up during the quarter under review due to a faster growth in expenditure over revenue collection. The amount of deficit financing was more than met with borrowing from the non-bank and foreign sources," the BBQ said.

Regarding the foreign-exchange market, the BBQ said nominal exchange rate depreciated in line with the market forces.

"In order to avoid any disruptive fluctuations in the foreign- exchange market, the BB supported to smooth large fluctuations," it noted.

The BBQ also said despite the fact that nominal exchange rate depreciated slightly, real effective exchange rate appreciated a bit due mainly to decline in relative price of trading partners.

"Foreign-exchange reserves edged down slightly in the Q1 of FY 18 but remains adequate around seven months of imports," the BB noted.

The momentum in trading activities on the capital market continued during the Q1 of FY18, it said, adding that this momentum benefitted from strong economic growth, higher private-sector credit growth and negative real interest rates on deposits in the banking system.

The Dhaka Stock Exchange broad index (DSEX) reached the highest level in September 2017 (6092. since January 2013.
source: The financial express

39

BBA Discussion Forum / Trade facilitation key to attract FDI’

« on: May 28, 2017, 01:25:31 PM »

A new report shows that an improvement in the trade facilitation environment by one per cent is likely to increase 3.2 per cent of Foreign Direct Investment (FDI) into manufacturing sector.

Prepared by the Global Alliance for Trade Facilitation, the report, titled ‘Can Trade Facilitation Drive Manufacturing FDI?’ analysed the importance of trade facilitation in attracting and retaining investment.

 “Developing economies with strong trade facilitation environments were also found to attract high-value investments, especially in desirable industries such as auto parts and aerospace manufacturing,” the report mentioned.

The report also observed that FDI in manufacturing has been crucial to emerging economies’ success stories.

Member countries of the World Trade Organisation (WTO) are now on the move to implement the Trade Facilitation Agreement (TFA) which comes into effect on February last.

Trade facilitation means easing of customs procedures through electronic transaction system across the border.

Bangladesh, being a Least Developed Country (LDC), is not obliged to implement the TFA immediately.

The country is now in a process to submit its notification to the WTO. Once the notification is submitted, the TFA becomes obligatory for the country.
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40

BBA Discussion Forum / BB should look into Islami Bank issue: analysts

« on: May 28, 2017, 01:21:26 PM »

Bangladesh Bank should intervene to restore stability in the trouble-hit Islami Bank Bangladesh Ltd and avoid spillover impact on the entire banking industry, analysts said yesterday.

IBBL has been going through massive changes – from the owners to the board, committees and top management – for the past one year.

Two independent directors of the bank—vice chairman Syed Ahsanul Alam and chairman of the risk management committee Abdul Mabud—resigned from the board on Thursday, two days after their removal from their executive posts.

A group of seven directors have threatened to quit their jobs en masse if any of them is forced to step down.

The recent rift in the board has got a lot of attention from the businesses, the bank's depositors and the banking community as a whole.

Yet, Bangladesh Bank, the country's banking regulator, has kept mum on the issue.

“The situation demands a statement from Bangladesh Bank,” the Centre for Policy Dialogue (CPD) said yesterday in its review on the economy.

“The central bank needs to play an important role on the matter. But we are not seeing any clear statement or role from the central bank,” CPD Executive Director Fahmida Khatun said at a media briefing at Brac Centre Inn in the capital.

The think-tank said a number of recent developments have created concerns about the smooth functioning of Islami Bank and its future. The CPD listed the concentration of shares into the hand of a single owner-borrower as one of the key concerns.

“An orderly transition in the bank is urgently required,” the CPD said, adding that the central bank has a role to protect the interest of depositors and borrowers of the bank and improve its governance.

Ahsan H Mansur, executive director of the Policy Research Institute (PRI), another think-tank, said the government itself is taking the bank towards collapse by appointing some unfit people to the board.

The fate of IBBL, the country's largest and best private commercial bank, will be similar to that of state banks because of political interference, he said. He said BB was opposed to the changes but overruled by the government. So, BB has nothing to do other than remaining silent.

Mansur suggested the central bank be more cautious about the loans being approved by the board.

“It should strengthen the monitoring so that loans don't go to the same people or the people close to the board members.”  “The big challenge for the central bank will be to stop loan irregularities of the bank,” he said.

Biru Paksha Paul, former chief economist of the central bank, said it is the central bank's responsibility to look into the disorders in a bank.

Khatun of the CPD said there was allegation against the IBBL that it was involved in terror financing and funding political violence, and the government took steps against it.

She said the CPD welcomed the government move up to the point. She said investigations must take place if any of the bank's activities had harmed the country or the people and were against the spirit of independence.

The bank has reached a stage in the last two years that it is now facing many problems, said the economist, adding that when the largest borrower becomes the largest owner then it becomes a problem for the bank's corporate governance.

Mirza Azizul Islam, a caretaker government adviser, however, said BB should not make public statement over the recent crisis of IBBL at the moment.

“The central bank should allow the ongoing internal change at IBBL and observe the situation,” he said.

He suggested BB strengthen the monitoring of IBBL's loan activities and take internal measure to restore peace within the organization.
source:The daily star

41

BBA Discussion Forum / BB caps interest rates at 9pc for women borrowers

« on: April 04, 2017, 04:22:08 PM »

Banks now can charge maximum 9 percent interest for lending funds to women entrepreneurs and small enterprises, according to a Bangladesh Bank directive yesterday.

Commercial banks will be able to charge the bank rate plus a maximum 4 percent interest rate at client level, according to the directive. At present, the bank rate is 5 percent.

The move aims to bring more women entrepreneurs into businesses and productive sectors, according to the circular.

Currently, BB offers several refinance schemes for women entrepreneurs in cottage, micro and small enterprises and agro-business.

Under the refinancing schemes, banks first disburse funds among borrowers and then seek reimbursement from BB. For the service, commercial banks get funds from the central bank at lower-than-market rates.

The new lending rate came after some banks were found to be charging more than 10 percent whereas the average lending rate is in the single digit, said a senior executive of the central bank.

The weighted average lending rate was 9.77 percent in February, according to BB data.
Star Business Report

42

BBA Discussion Forum / Remittance continues its slump

« on: April 04, 2017, 04:20:42 PM »

Remittance continued its downward course in March, declining 16.25 percent year-on-year to $1.08 billion -- a development that is likely to prod the central bank into providing incentive to remitters to send money home through official channels.

There is a rising tendency among expatriate Bangladeshis to remit money through digital hundi, depriving the government of foreign currency.

Remittance is Bangladesh's second-biggest source of foreign currency income after garment exports, and this fiscal year the inflow has been lower in every month from a year earlier.

The decline has hit the current account balance negatively and widened the balance of payments.

March's receipt takes the nine-month tally to $9.19 billion, down 18.18 percent year-on-year, according to data from the Bangladesh Bank.

The declining remittance is a new challenge for Bangladesh, Mitsuhiro Furusawa, deputy managing director of the International Monetary Fund, told The Daily Star last month.

The BB has sent two teams to Saudi Arabia, the UAE, Singapore and Malaysia to study the causes for the slide and the ways to increase the inflow. The teams found the expatriate Bangladeshis have been sending money through hundi.

Subsequently, they will recommend the government to provide incentives to the remitters so that the inflow through the official channel increases.

The government higher-ups are also mulling over the idea as an attempt to arrest the slide in remittance.

“I think this is a solution through which the decline in remittance receipts could be tackled,” Planning Minister AHM Mustafa Kamal said at a press meet recently.

The matter has already been discussed with the prime minister, finance minister and the BB, he said then. The minister did not elaborate on the incentives.
Source: Star Business Report

43

Business Administration / Call money rate declines to 3.5%

« on: February 16, 2017, 11:03:14 AM »

The call money rate declined to a record low. The rate fell to 3.5% in July this year.

This is an indication that the market is flush with liquidity with hardly any demand for credit.

Data shows the weighted average call money rate was 8.16% in 1997, which came down to 7.37% in 2007.

The call money rate is the rate at which banks lend overnight money to each other to fill the asset liability mismatch or to meet sudden demand for funds. The market was introduced in the country in the early 1980s.

The demand and supply of liquidity affect the call money rate: a tight liquidity condition leads to an increase in the call money rate and excess funds push the rate down.

Heavy government borrowing from the public via savings instruments, which are much higher yielding schemes, is a major reason for the banking sector’s excess liquidity, said Anis A Khan, managing director of Mutual Trust Bank.
“Thus, the government does not need to borrow as much from the banks anymore — its borrowing from the banking system has plummeted to a historical low in the last few years.”

Banks are relying on the Bangladesh Bank Bills, which yield less than 3 percent in interest rate, to invest their money.

In the last six months, the central bank took back Tk 24,000 crore through the system to minimize the growing liquidity in the market.

When there is surplus liquidity in the system, the call money rate tends to move closer to the fixed reverse repo rate.

The reverse repo rate, which tends to be somewhat conservative in Bangladesh, yields more than the overnight money market.

The interest rate on reverse repo has remained unchanged at 5.25% since February 2013.

Reverse repo is the rate at which banks park their excess funds with the BB — the last option when no other avenues are available for investing excess money.

But the BB did not accept any bid for reverse repo since November last year.

The net sale of different savings schemes rose to about Tk 33,689 crore, which was the highest in the country’s history, against a government target of Tk 15,000 crore for fiscal 2015-16.

Investors were lured in by interest rates as high as 5 percentage points more than those offered by commercial banks on term deposits.

On the other hand, the government borrowed only around Tk 4,000 crore from the banking system against a target of Tk 38,523 crore for fiscal 2015-16.

Though the central bank recently imposed restrictions on foreign loans, entrepreneurs have availed over $8 billion in loans from foreign sources between 2012 and 2015.
Source:The Daily Ittefaq

 




   

44

Business Administration / BB raises bank cash reserve requirement

« on: February 16, 2017, 11:01:19 AM »

June 24, 2014 12:15 am·0 CommentsViews: 6890
Staff Correspondent
A file photo shows Bangladesh Bank headquarters in Dhaka. Bangladesh Bank on Monday raised the cash reserve requirement by 50 basis points to 6.5 per cent for scheduled banks to curb inflationary pressure on the economy, said officials of the central bank on Monday. — New Age photo

Bangladesh Bank on Monday raised the cash reserve requirement by 50 basis points to 6.5 per cent for scheduled banks to curb inflationary pressure on the economy, said officials of the central bank on Monday.
A BB official told New Age that the central bank would mop up around Tk 3,000 crore from the banks by increasing the CRR, also known as cash reserve ratio, as the banks had excess liquidity amid a dull business condition.
Under the new rules, the scheduled banks will have to maintain 6.5 per cent CRR with the central bank from their total demand and time liabilities on a bi-weekly basis.
The BB issued a circular to managing directors and chief executive officers of all banks in this regard asking them to maintain the new CRR ratio from today (Tuesday).
The banks will have to maintain the CRR at 6.0 per cent instead of the existing 5.50 per cent on daily basis, but the bi-weekly CRR will have to be 6.5 per cent, according to the BB circular.
The new CRR comes after a gap of more than three years and six months. The central bank last increased the ratio by 0.5 percentage points to 6.0 per cent on December 1, 2010.
The central bank, however, unchanged the rate of statutory liquidity ratio (SLR) at 19 per cent.
The BB official said that the central bank took the initiative due to increasing trend in excess liquidity in the banks amid sluggish business situation.
‘Besides, the inflationary pressure has recently increased. Due to the central bank move, the inflation may decline in the months to come as the BB will mop up huge amount of money from the market as part of its latest initiative’, he said.
The country’s point-to-point inflation in May increased by 0.02 per cent to 7.78 per cent as consumer price index of some food items rose, according to the Bangladesh Bureau of Statistics data.
The rate of inflation also increased by 0.32 per cent in May from that of 7.48 per cent in April this year.
Due to the excess liquidity, the scheduled banks are now investing Tk 6,500 to Tk 8,000 crore with the BB’s every auction of Reverse Repo, he said.
The banks invested Tk 6,927 crore with the rate of interest of 5.25 per cent in the Reverse Repo on June 19, according to the BB data.
Economist AB Mirza Azizul Islam, who was a former finance adviser to the caretaker government, told New Age on Monday that the latest CRR policy would not put negative impact on the financial market as excess liquidity in the banking sector maintained an increased trend in the recent period amid sluggish business.
The credit demand from the private sector is slow which pushed up the idle money in the banks along with the non-bank financial institutions, he said.
Against the backdrop, the new CRR policy will help contain the inflationary pressure, Aziz said.
Former BB governor Salehuddin Ahmed said the new CRR policy might slightly discourage the entrepreneurs due to contractionary money supply.
The profitability of the banks will decline in the coming months due to the new rule, he said.
Salehuddin said, ‘I have not found any solid ground for increasing the CRR right now as the new policy will not bring any major positive impact on the market.’
BRAC Bank managing director Syed Mahbubur Rahman said that the money supply in the market would decline due to the latest CRR initiative by the central bank.

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Business Administration / Bangladesh to be a 'growth outperformer' in 2016-25

« on: February 16, 2017, 10:49:10 AM »

Bangladesh has been picked up as a growth outperformer for the next decade riding on low commodity prices, demographic dividend and expected measures aimed at improving the business environment.

London-based BMI Research has picked six countries -- Bangladesh, Ethiopia, India, Mexico, Pakistan and the Philippines -- that will be growth performers in 2016-2025.

The countries “will rapidly climb the GDP country rankings between now and 2025,” it said.

The six countries are expected to gain an average of 6.5 places each in global GDP rankings by 2025, with Ethiopia (+12) and Bangladesh (+11) making the most gains, said BMI Research, which is owned by the Fitch Group.

Bangladesh is the 47th largest economy in the world in terms of gross domestic product, according to the World Bank's 2015 ranking.

The BMI analysis said three factors will be the key to growth.

“Economic growth will be strongest in net commodity importers that have positive demographic trends and economic reform momentum.”

With regards to commodities, net commodity importers will benefit from generally lower commodity prices over 2016-2025 compared to 2006-2011, particularly for oil.

Bangladesh relies heavily on imports for oil.

BMI Research said commodity exporters will underperform in the absence of other growth drivers, while reformers will outperform, helping set apart otherwise similarly structured emerging markets.

Developed markets will stagnate and generally lose ground to emerging markets in the GDP rankings, it said.

Economic growth in the developed markets will generally be capped by weak demographic trends and a lack of substantial economic reform. In terms of demographics, rapidly ageing populations, particularly in Western Europe and Japan, will result in weak labour force growth.

Turning to demographics, the research said countries with positive demographic trends will enjoy an endogenous boost to economic activity. Of Bangladesh's 16 crore population, 10.5 crore, which is more than 65 percent of the population, are aged between 15 and 64 years, said the United Nations Development Programme in April.

With more youth entering the working age population, Bangladesh is poised to benefit from a demographic dividend in the next 10 years, according to the World Bank. About reforms, BMI Research said countries that it expects to enact economic and political reforms, specifically measures to improve business environment and unlock economic productivity, will grow faster than those without such reform momentum.
Source: The Daily Star