The Asian Development Bank (ADB) will put forward a set of recommendations on the demutualisation of the stock exchanges to the government by next month to help the government and the bourses take decision on the demutua-lisation process.

“We are looking at the demutua-lisation of the Dhaka Stock Exchange and studying the situation. We will be making our recommendations to the government by February this year,” ADB Country Director Thevakumar Kandiah told journalists after a meeting with the premier bourse officials at the DSE building yesterday.

It will be up to the government and the DSE to decide on how they will take the recommendations, the ADB country director said.

The ADB is offering technical assistance to help implement the demutualisation.

Kandiah also said the ADB is preparing to release this year a second financial assistance package -- capital market loan programme -- for the development of the stockmarket in Bangladesh.

“We have a team that is preparing the policy actions of the loan progra-mme,” he added.

DSE President Md Shakil Rizvi said the bourse is working with many international agencies including the ADB in making the stock exchange an international standard resourceful entity.

“This is not the first time that the ADB is working with the stock exchanges; it also got involved in the automation process of the premier bourse and the establishment of the Central Depository of Bangladesh Ltd,” he said.

The meeting also discussed the technical and other assistances the Dhaka bourse will get from the donor agency, Rizvi added.

Recently, following a regulatory instruction, the DSE submitted a concept paper on its demutualisation process to the finance ministry and the Securities and Exchange Commission.

Demutualisation will transform the bourse from an entity owned by mostly brokerage members into a for-profit company of the shareholders.

The process is expected to ensure sound corporate governance, alternative business models and operational efficiency. A demutualised exchange can freely trade on the market like a public company.

The Daily Star/Bangladesh/ 9th Jan 2012

Islami Bank Bangladesh Limited has launched a new deposit scheme for school student titled “Mudaraba school student savings scheme” with the slogan of “Write, read and make savings”, says a press release. This scheme was launched to promote the habit of savings and planned expenditure among school students. This scheme will enable to raise fund for higher education and economic solvency for students.

Students under 18 years of age studying in Bangladesh can open account under this scheme. The initial balance of this account is Tk 100 and profit will be given on this balance.

Customers can deposit and withdraw money through online branches all over the country. Money can be withdrawn through ATM booths also.
Balance may be known through mobile SMS.

Account can be transferred to any branch of the Bank and no charge will be taken for closing the account.

This account will be run by bonafide guardians with the name of students. Students will be able to continue this account after maturity as “Mudaraba Savings Account”.

The certificate of school headmaster or school authority, two attested photographs of students and guardians and attested photographs of nominee is required to open this account.

It is mentionable that top ten depositors for every month will be awarded.

The Daily Independent/Bangladesh/ 8th Jan 2012

Eastern Bank Ltd (EBL) has launched a new lending product titled ‘EBL Nobodoy’ to finance the emerging agro-based industries of the country.

Dr. Atiur Rahman, governor Bangladesh Bank, launched the ‘EBL Nobodoy’ at Cox’s Bazar on Friday, says a press release. Ali Reza Iftekhar, managing director and  chief executive officer, Md. Khurshed Alam, head of SME business, Anwar Faruq Talukder, head of small business, Ziaul Karim , head of marketing of EBL, and Mrinal Sircar, programme manager, and Taif Ul Islam,  of South Asian Enterprise Development Facility-IFC were also present.

Launching this innovative financial product, Bangladesh Bank governor Dr Atiur Rahman encouraged other financial institutions to create need-based initiatives that promote climate-change mitigation projects. “Farmers being able to generate their own electricity will also help reduce the diesel subsidy being provided by the government,” he added. Ali Reza Iftekhar, managing director of Eastern Bank Ltd, said “Our bank is dedicated to sustainable development. Sustainability is the cornerstone of everything that we do.

We are committed to finance businesses that invest in green technology and will continue exploring innovative ways aiming at improving local communities and the environment.”“EBL NOBODOY” is targeted to facilitate finance to the very emerging agro-based industries where million numbers of rural entrepreneurs are working. Target market is also thirty six agro based priority sectors including bio pesticide, bio gas and power generating industry from husk of rice, poultry dung and cow dung etc.

An entrepreneur can avail up to Tk 1 million loan without any collateral security. For above Tk one million and upto Tk seven million 30-50 per cent of the availed loan amount as FDR to be provided. The loan is repayable in equal monthly instalments within maximum five years period. Interest rate is 10 per cent per anum. EBL has taken a special project in association with South Asian Enterprise Development Facility, managed by IFC to provide finance to poultry farmers under ‘EBL Nobodoy’ for converting poultry waste to bio-gas and electricity.

The Daily Independent/Bangladesh/ 8th Jan 2012

The risk assets of five state-owned banks remained at an alarming stage in the first nine months of 2011 calendar year because of weak recovery of their default loans and high borrowings from the call money market.

Owing to the causes, asset earnings of the state-owned banks were bellow the expectation in January-September period of the last calendar year, a report said. The banks are state-owned Sonali, Agrani, Janata, Rupali and BASIC.

The situation prevailed in the five state-owned banks in the period would not affect the government in the short term, but huge borrowing from the local call money market would certainly hamper the implementation of the government directives for the banks, reads a recent report of Banking and Financial Institution Division on five state owned banks’ financial status in January-September period of 2011.

It revealed that the default loan recovery of the banks ranged between 17 and 75 per cent in the time term the rates not satisfactory. In the period, the top 20 defaulters of the five banks accounted for between 17 and 38 per cent of the total defaulted loans.

As per the report, risk assets of the largest state-owned bank, Sonali, decreased by 9.71 per cent in the nine compared to Tk 326.90 billion in 2010 calendar year.

Agrani’s risk assets raised by 13.55 percent to Tk 217.87 billion in the periods while that of Janata reduced by 20.23 percent to Tk 249.08 billion. Risk assets of Rupali increased by 95.93 per cent to Tk 217.87 billion. BASIC Bank’s risk asset was 12.11 per cent higher to 60.91 billion in first six months of 2011 compared to that in 2010.

Though Sonali was once a money lender, it became the biggest borrower from the money market. Data showed on an average Sonali borrowed Tk 4.20 billion from the call money market each day from December 7 to December 14. The total borrowed amount of the few days stood at Tk 25.25 billion. Agrani borrowed Tk 70.52 billion in total in the period and Rupali Bank Tk 20.35 billion.

Janata Bank, on the other, borrowed Tk 1.15 billion on October 31 while its total borrowing was Tk Tk 35.13 billion for the days mentioned above.

Dr AB Mirza Azizul Islam, former finance adviser to a past caretaker government, told daily sun that state banks should not operate for long time with liquidity borrowed from call money market.

The state of solvency of the state-owned banks would be questioned if they continued borrowing extensively from call money market, he added. As per a Memorandum, risk assets of state-owned banks should not be over 5 per cent of their capital. But the rate was much higher than the limit in the reviewed period, which would result in reducing banks’ profit, Azizul Islam also said.

Data of top 20 defaulters of four banks, except for BASIC Bank, show that their total default loans amounted at Tk 3.65 billion till September 30, said the report submitted to finance ministry on December 31, 2011.

Sonali could retrieve Tk 3.43 billion or 62.78 percent of its defaulted loans recovery target in the nine months, Janata recovered Tk 2.031 billion or 70 percent of its target, Agrani Tk 1.90 billion or 46.58 percent of target and Rupali Tk 357.7 million or only 18.63 percent of its target. Rupali could not recover sufficient amount of its defaulted liabilities in the period.

Sonali Bank earned 1.40 per cent from assets till September 30, 2011 against 0.32 per cent in 2010 while Agrani bagged 0.40 per cent in the period against 1.33 per cent in 2010. Janata earned 1.19 per cent of its total assets in the nine months against 1.38 per cent a year back, Rupali earned 054 per cent of its total assets in the nine months against 1.15 per cent a year back, according to the latest report.

The number of loss-making branches of Janata dropped to 71 in the period from 96 in the previous year while such branches of Sonali came down to 83 in the period from 90 a year back. The number of loss-making branches of the Agrani Bank dropped to 48 while Ruplai’s loss-making branches remained 22.

Sonali Bank’s capital gain was Tk 4.182 billion till September 30 against a shortfall of Tk 2.04 billion in 2010 while Janata made a capital shortfall of Tk 2.12 billion against a shortfall of Tk 222.7 million one year back.

The Daily Sun/Bangladesh/ 8th Jan 2012

The central bank has tightened money supply to discourage imports and reduce mounting pressure on forex reserves, Governor Atiur Rahman said yesterday.

“Tightening money supply was the only tool left with me,” Rahman told The Daily Star in an interview.

He said there is no need to flood the market with non-productive items and luxuries, such biscuits, fruits and luxury cars.

Bangladesh Bank raised the repo rate, which is used to inject money into the banking system, by half a percentage point to 7.75 percent on Thursday. It was a fifth hike since March. It also increased the reverse repo rate, through which it absorbs excess cash from banks, to 5.75 percent.

Also, the central bank has recently raised the LC margin, which is an advance payment to bank by importers, to 50 percent from 30 percent of total value to discourage imports. It also withdrew cap on lending rates so that banks can set it in line with their rising cost of funds.

“The steps are yielding results. The growth of LC opening was minus 3 percent last month,” Atiur said.

The economy is in a challenging situation due to national and international factors. The debt crisis in Europe, which is the destination of Bangladesh's over 50 percent exports, is likely to affect export earnings.

The continuous devaluation of the taka has been fuelling inflation. The dollar traded at Tk 83 on Thursday, which was Tk 70 in January last year. Stagnant foreign aid has also made the central bank concerned. Foreign exchange reserve has gone down to $9.6 billion from nearly $11 billion a year ago.

“I'll continue with a tight monetary policy for a while. If the import goes down further there will be an equilibrium attained in a few months,” Rahman said.

Still, the governor is not fear-free.

“If the oil prices increase further, additional pressure will be on the foreign exchange reserve,” Atiur said.

According to BB data, import payments for fuel have doubled to over $6 billion this fiscal year to feed the rental-power plants which is creating a mismatch in the balance of payments and reserve.

Asked if a tight money supply and government borrowing would affect private sector credit, the governor said it is not likely to be so.

“If it (credit) goes down a bit, it can't be a concern,” said Rahman.

Of Tk 400,000 crore annual credit, the government borrows around Tk 25,000 crore only, he explained.

The Daily Star/Bangladesh/ 8th Jan 2012