Bangladesh Bank (BB) has sought support from mayors of municipalities across the country as part of its fresh move to identify small and medium entrepreneurs.

“We’ve sent letter to mayors of municipalities Tuesday across the country requesting them to inform us about the real small entrepreneurs and industry cluster as the central bank is giving such entrepreneurs many incentives including advices and credit facilities,” said a central bank official.

Many small and medium entrepreneurs can easily take loan from banks but a good number of such entrepreneurs, especially those living in rural areas, are not availing this opportunity due to lack of information, the BB official added.

Earlier, the central bank sent letters to cambers and deputy commissioners across the country seeking their support about the small entrepreneurs.

News: The Daily Sun/Bangladesh/13th-Dec-12

The state-owned Agrani Bank Ltd is borrowing from money market to operate its financial activities as it faces a moderate shortage in liquidity.

According to the central bank’s data, Agrani Bank Wednesday borrowed Tk 11.74 billion, the highest amount for a single bank in a day.

Another state-owned Sonali Bank borrowed Tk. 3.80 billion on the day. But the other state-run Janata Bank and Rupali Bank lent Tk 2.75 billion and Tk. 6.05 billion respectively as they have slightly surplus liquidity.

Bangladesh Bank figures showed that the call money rate for overnight borrowing, however, remained stable for past few months.

As of 12th this month, the highest lending rate reached 10 percent while the lowest rate was 7.05 percent, which implies that the lending rate on an average was 8.35 percent.

Among the private banks, Prime Bank Ltd borrowed highest amount of Tk 10.62 billion Wednesday, followed by Mercantile Bank’s Tk 6.09 billion and Eastern Bank’s Tk 4.95 billion.

The private banks that lent money were Trust Bank Ltd Tk 11 billion, United Commercial Bank Tk 9.89 billion and City Bank Tk. 6.90 billion.

A number of 18 financial institutions (FIs) borrowed from money market with Investment Corporation of Bangladesh (ICB) borrowing the highest amount of Tk. 3.85 billion, showed BB data.

News: The Daily Sun/Bangladesh/13th-Dec-12

After independence of Bangladesh, there were only six nationalised banks and one specialised bank. The first private commercial bank came into being in 1982. Before the private banks entered the scene, the people of Bangladesh, who were directly or loosely related with the banking sector, were not in a position to realise the benefits offered by real banking. As AB Bank Limited, the first-ever private commercial bank in Bangladesh, began operating in the market, the banking scenario took a new shape. The nationalised commercial banks (NCBs) witnessed a new era of competition in course of time.

The central bank took initiatives to streamline the assets of the banks according to their quality through issuing Banking Regulation and Policy Department (BRPD) circular No-14 regarding loan classifications and provisioning. It was the first fruitful initiative taken by the Bangladesh Bank (BB). If the central bank of Bangladesh had not taken this remarkable initiative, the banking sector would have been affected by repeated volatilities.

Ethical commitment to the stakeholders, including the depositors, is the most vital necessity for bankers. Since independence no research seems to have been undertaken by the any quarter for finding out the real situation or to decide how many banks are needed for the small economy of ours. We have nearly 48 banks now, and are going to launch nine more banks. Many are not able to understand the rationality behind allowing this huge number of banks to operate.

Banks should set their annual business target on the basis of the current market situation, GDP (gross domestic product) growth, condition of broad money, status of public borrowing, congenial environment for investment, law and order etc. Emotional as well as irrational attitude that is at work behind setting the annual budget forces the bank management to get the allocated budget at any cost. In the process, regulatory requirements are sometimes ignored. Bankers spend a substantial portion of their time on activities related to management of non-performing loans and unnecessary movements in the name of hunting for new clients for financing. For meeting the managements' desire in terms of achieving profit target, the bankers have to finance many clients who have no capacity to take the burden of over-financing of the banks. Due to overtrading privilege, the borrowing clients naturally divert funds to the non-productive sector or non-performing businesses.

Bankers should be very cautious in lending to those who are enjoying facilities from more than one bank. Discreet steps of caution have to be taken by the bankers in assessing whether or not the borrowers have the capability to take further financing. In the context of big corporate clients, the culture of 'name-banking' has been on the increase day by day. This spree of financing, mostly known as overtrade, is leading to unhealthy competition in the market. A centralised and 24/7 type of CIB (Credit Information Bureau) data base has become a crying need of the Bangladesh financial sector. For clamping down on the unscrupulous businessmen who are constantly deceiving the bank managements with the help of some dishonest bankers and taking away public money, Bangladesh Bank should come forward to mitigate the problem with the time-befitting tools without further delay.

Banks should be very calculative and methodical at the time of lending funds out of the public money, for which the depositors keep their trust in the lending banks. Proper selection of borrowers should be the first and foremost priority for the bankers and the virtue of trustworthiness must not be forgotten by the bankers at any point of time.

Bankers should be very much aware of the quality of the securities kept against lending. According to a senior banker of the country, bankers should use 'science' first in the selection of borrowers and then apply 'arts' during the monitoring period. Banks are struggling hard in Bangladesh due mainly to improper management of portfolio. Lack of monitoring over the portfolio has caused fund-diversion from working capital to the long-term capital investment such as purchase of land and investment in the shares of different companies through the stock market. The spree of land purchase by unscrupulous borrowers has led to the backlog in their portfolio and, ultimately, is making the assets of the banks non-performing and the bankers are counting huge costs.

In most cases, the borrowers breach the contract through loan against trust receipt (LATR) the banks offer to the trustworthy clients. One cannot understand why the loan against imported merchandise is past due over a long period of time-one year or more in place of three or four months-and why the bankers entertain further credits without adjustment of the previous series of long overdue ones. If the bankers keep the record of stock report through regular visit of merchandise, such chronic complexities could never have happened.

Bankers should not run after profit, profit will run after them if borrower selection is done through extensive evaluation process.

(The writer is Senior Executive Officer, Bank Asia Ltd, Anderkilla Branch, Chittagong.

News: The Daily Financial Express/Bangladesh/12-12-12

The central bank has revised note refund regulations after 36 years considering massive changes in security features of notes and peoples mentality. From now on, Bangladesh Bank (Note Refund) Regulations -1976 is repealed and all commercial banks are asked to settle claim of charred, damp, deformed and decomposed notes under the revised regulations, said a BB circular on Tuesday.

The revised regulations may be called the "Bangladesh Bank (Note Refund) Regulations – 2012 with immediate
effect, it said.

It also reads that the BB board made the regulations prescribing the circumstances in, and the conditions and limitations, subject to which the value of any mutilated or imperfect note may be refunded as of grace.

On general provisions in relation to all claims, the revised regulations says no claim in respect of a note alleged to have been lost, stolen or wholly destroyed shall be entertained.

No claim in respect of a note shall be entertained by the prescribed officer unless such a note is identified as a genuine note. No claim in respect of a note which has been deliberately cut,  torn, defaced, altered or dealt with in any other manner, not necessarily by the claimants, enabling the use of the same for making of a false claim under the regulations or otherwise to defraud the bank or  the public shall be entertained.

On disposal of mutilated note, no claim in respect of a mutilated note shall be entertained unless the single largest piece of the note presented is more than 50 per cent.

On disposal of obliterated, mismatched, altered and damp notes: a claim in respect of an altered, mismatched or fully obliterated note shall be rejected.

News: The Daily Independent/Bangladesh/12-12-12

In line with an IMF prescription, the government has decided to set the exposure limit of a commercial bank in the stockmarket at 25 percent of the bank's total capital.

A finance ministry official said the changes will be included in the draft amendment to the Banking Companies Act.

However, the government wanted the exposure limit to be at 40 percent of a bank's total capital. The existing exposure limit of a bank is 10 percent of its deposits.

A team of the International Monetary Fund came to Dhaka recently to review the implementation of the lender's conditions tagged with the release of the second instalment of its $1 billion loan.

The finance ministry official said the amendment to the Banking Companies Act will be passed in parliament in March.

Once the amendment gets passage in parliament, the central bank will give the banks two years' time to reset their stock exposure limits.

Various quarters blamed the stockmarket debacle in 2011 on the banks' higher stock exposure.

Banks saw falling profit and rising defaulted loans this year.

Several bank officials said higher stock exposure of banks has caused their defaulted loans to go up, which ultimately pulled down their profit.

Bangladesh Bank had long been asking the government to tag the stock exposure limit of banks with their capital, instead of deposit.

But due to pressure from some vested groups, the government had been avoiding the central bank's suggestion.

After the debacle early last year, a stockmarket probe committee led by Krishi Bank Chairman Khondker Ibrahim Khaled had also suggested the banks' stock exposure limit at 25 percent of their capital, which is also a global standard.

The government-formed committee to scrutinise the draft amendment to the Banking Companies Act recommended such limit at 40 percent of the banks' capital.

However, the banks' scope to invest in the stockmarket will remain high despite the amendment, as the banks have a strong capital base now.

After the amendment, banks will be able to raise their stock investment up to more than Tk 14,000 crore.

According to BB statistics, the amount of total capital in the banks was Tk 56,201 crore in June.

When the stockmarket was booming in 2010, the banks' investment in stocks was around Tk 16,000 crore.

An official of the central bank said the banks' capital has grown much in the recent times in line with the Basel-II requirements, but their capital will increase further when Basel-III will take effect soon.

According to BB statistics, the total capital of the banks was Tk 20,578 crore in 2008.

The banking sector has witnessed an increase of Tk 35,623 crore in their capital in the last four years.

It means the overall capital growth has been 173 percent over the last four years with an annual average growth of about 49 percent.

News: The Daily Star/Bangladesh/12-12-12