Dhaka, Bangladesh (BBN)

The net sales of national savings certificates (NSCs) came down to BDT 37.41 billion in April 2019 from BDT 41.31 billion a month ago, according to the Department of National Savings (DNS) latest statistics.

It was BDT 33.54 billion in April 2018.

The declining trend of NSCs sales may continue in the coming months, senior bankers and officials said.

Many savers now face difficult to purchase the savings schemes mainly due to introduction of the online management system for NSCs, they added.

Under the government’s latest moves, both interest and principal amount of the NSCs will be transferred to the beneficiaries across the country using digital payment system from July 01 this year.

The government has already set up an online database under the Public Expenditure Management Strengthening Programme to see whether or not the savings opportunity is being abused by exceeding the investment limit or making fictitious investments.

Under the programme, the savers will be required to submit copy of their national identity cards, bank account numbers, mobile numbers, and tax identification numbers (TINs) while purchasing the NSCs and bonds.

Those who have already invested in the savings certificates and bonds will need to submit these to draw profit or encash matured ones.

Besides, the savers will be required to make payment in cheque for certificates worth above BDT 50,000.

Four savings certificates - five-year Bangladesh Sanchayapatra, three-monthly Profit Bearing Sanchayapatra, Family Savings Certificate and Pensioner Sanchayapatra – have been popular among the savers, as they receive more than 11 per cent annualised profit.

On the other hand, the net sales of NSCs grew by 8.51 per cent to BDT 434.74 billion during the July-April period of the fiscal year (FY) 2018-19 from BDT 400.63 billion in the same period of the FY ‘18.

The government’s outstanding savings certificates sales rose to BDT 2,812.41 billion at the end of April from BDT 2312.99 billion in the same period previous year.

Meanwhile, finance minister AHM Mustafa Kamal in the national budget for the FY 2019-20 proposed to increase source tax on the yield of NSCs to 10 per cent from the existing level of 5.0 per cent.

The sales of NSCs may fall further if the proposed sources tax will be implemented, they added.

However, the government has already projected lower target of borrowing from non-banking sources, particularly national savings schemes, to meet its budget deficit partly.

By selling savings instruments, the government is set to borrow BDT 270 billion in the FY’20 from BDT 450 billion in the revised budget of FY’19, according to the proposed budget.

The original target of such borrowing was BDT 261.97 billion for the FY’19.

BBN/SSR/AD

Dhaka, Bangladesh (BBN)

The forex reserve rose to $32.02 billion on Thursday from $31.93 billion of the previous working day, according to the central bank’s latest statistics.

“Our forex reserve has crossed the $32 billion-mark again after receiving a fund worth $50 million from the World Bank,” a senior official of the Bangladesh Bank (BB) told the BBN in Djaka.

He also said the upward of forex reserve may continue in the coming days.

The BB earlier received a total of $50 million fund from different development partners including Asian Development Bank (ADB), the central banker added.

The fund inflow from the development partners normally rise in the month of June each year, according to the BB official.

The reserve was US$31.13 billion in the first week of May after making a regular payment of US$1.24 billion to the Asian Clearing Union (ACU) against imports during the March-April period of 2019.

Bangladesh will be able to settle around five months import bills with the existing FX reserve.

The highest $33.68 billion reserve was recorded on September 05, 2017.

Earlier on 27 December last calendar year, the reserve was $33.10 billion. It was $32.94 billion on June 30, 2018.

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BBN file photo

Dhaka, Bangladesh (BBN)- The exchange rate of the Bangladesh Taka (BDT) remained stable against the US dollar in the last week despite higher demand for the greenback for settling the import bills.

The US dollar was quoted at BDT 84.50 each in the inter-bank foreign exchange market on Thursday unchanged from the previous level.

The local currency depreciated by 60 poisha against the greenback in the inter-bank forex market from January 03 to May 06.

Earlier on April 29 last, the BDT lost its value by 10 poisha against the US currency on the same ground.
The greenback was quoted at BDT 84.50 each in the market on May 06 against BDT 83.90 on January 02 this calendar year.

On the other hand, the exchange rate of the US dollar remained stable at maximum BDT 84.50 each for sale of Bill for Collection (BC) during the period under review from the previous level.

The Bangladesh Bank (BB), however, sold US$ 72 million to the commercial banks particularly public ones in the last week for keeping the forex market stable. It was $ 25 million in the previous week.

A total of $2.25 billion was sold since July 01 of the current fiscal year (FY), 2018-19, to the commercial banks as part of BB’s ongoing support, according to latest official figures.

The central bank is continuously providing such support to the banks for making import payments, particularly for fuel-oils, fertilisers, LNG (liquefied natural gas), and capital machinery for power plants.

The demand for the US currency is gradually increasing, mainly due to higher import payments pressure, particularly of intermediate goods, capital machinery and fuel oils.

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Dhaka, Bangladesh (BBN)

Overall turnover decreased slightly during the period under review as some banks were reluctant to lend their excesses fund to other banks through call money market mainly due to lower interest rates.

The banks prefer to invest their fund in other forms including deposit to other cash-hungry banks instead of call money market, according to market insiders.

The volume of overall transactions in the market rose to BDT 52.64 billion from BDT 56.65 billion a week ago, according to the central bank’s latest statistics.

However, the weighted average call money rate rose to 4.55 per cent on Thursday from 4.54 per cent a week ago. It was 4.61 per cent on December 27, 2018.

The rate was 2.77 per cent at the end of June 2018. It was 4.03 per cent on December 27, 2017.

On the other hand, the central bank has continuously injected funds in the market through repo auction and assured liquidity support (ALS) to the primary dealer banks like previous weeks.

The existing liquidity pressure may ease slightly this week as cash incentive for apparel and clothing sector has already deposited with some banks.

Besides, a significant amount of fund, provided by the government for implementation of annual development programme has already been disbursed.

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Dhaka, Bangladesh (BBN)

The total amount of provisioning shortfall rose to BDT 81.27 billion as on September 30 from BDT 67.67 billion nine months ago, according to the central bank’s latest statistics.

The shortfall was BDT 79.80 billion as on June 30 this year.

Talking to the BBN, a senior official of the Bangladesh Bank (BB) said higher growth in non-performing loans (NPLs) pushed up the amount of provisioning shortfall with the banks during the period under review.

The amount of classified loans rose by nearly 34 per cent or BDT 250.67 billion to BDT 993.70 billion as on September 30, from BDT 743.03 billion as on December 31, 2017, the BB data showed.

The public sector banks have faced more provisioning shortfall than that of the private commercial banks, the central banker explained.

A total of 12 banks, out of 57, failed to keep the requisite provisions against loans, particularly the NPLs, in the third quarter (Q3) covering July-September period of 2018, the BB data showed.

The banks are: Sonali, Agrani, Rupali, BASIC, AB, Bangladesh Commerce, Mutual Trust, National, Premier, Social Islami, Shahjalal Islami and Standard.

Nine banks, including four state lenders, faced such provisioning shortfall during the final quarter (Oct-Dec) of 2017, while the number was 13 in the second quarter (April-June) of 2018.

It was 12 in the first quarter (Jan-March) of the current calendar year.

Under the existing BB regulations, the banks have to keep 0.25 per cent to 5.0 per cent provision against loans under general category, 20 per cent against substandard category, 50 per cent against doubtful loans, and 100 per cent against bad or loss category.

The banks usually keep the required provisions against both classified and unclassified loans from their operating profits in order to mitigate risks.

BBN/SSR/AD

Dhaka, Bangladesh (BBN)

The cut-off yield, generally known as interest rate, on 15-Year Bangladesh Government Treasury Bonds (BGTBs) rose to 7.55 per cent on the day from 7.20 per cent of the previous auction, held on September 26 while the cut-off yield on 20-Year BGTBs reached 8.24 per cent from 7.97 per cent, according to the auction results, issued by Bangladesh Bank (BB).

Talking to the BBN, a BB senior official said the yields on both BGTBs were re-fixed in line with the market requirement on the day.

The government borrowed BDT 12 billion on Tuesday through issuing the bonds to finance budget deficit partly ahead of the parliamentary election, the central banker explained.

Senior bankers, however, said the upward yield trend of the government securities may continue until the new government takes power.

The excess liquidity in banks dropped by nearly 15 per cent to around BDT 800 billion in September from BDT 940 billion three months before, mainly due to higher circulation of currency outside the banking system before the polls.

The central bank's continuous selling of the US dollar has also reduced the amount of excess liquidity in the banks, particularly in the state-owned commercial banks (SoCBs), they added.

The central bank of Bangladesh resumed offering the support by selling the US currency directly to the banks in recent months to keep the foreign exchange market stable.

As part of the move, the central bank sold US$45 million directly to three SoCBs on Tuesday to meet the growing demand for the greenback in the market.

On Monday, the BB also sold $50 million to five commercial banks on the same ground.

"A substantial amount of liquidity has already put on the central bank's vault in exchange for the recently-sold US currency," a senior treasury official of a leading private commercial bank (PCB) said.

Nearly BDT 67 billion entered into BB's vault in exchange for $799 million, sold by the central bank to the banks from July 01 to November 27, another BB official added.

The market operators, however, said the demand for the US currency is increasing gradually, mainly due to higher import payment pressure, particularly of petroleum products and capital machinery for power plants.

Earlier on November 19, the government revised its auction calendar, keeping an option for borrowing BDT 20 billion more on the same ground.

Under the revised calendar, the net borrowing from the banking system is set to reach BDT 30.42 billion by the end of November, compared with BDT10.42 billion earlier.

The government may borrow the additional amount from the market by the end of this month through issuing bonds, the central banker added.

He also said the government has revised its auction calendar to meet immediate cash requirements ahead of the 11th national polls, scheduled to be held on December 30.

Currently, four treasury bills (T-bills) are being transacted through auctions to adjust the government's borrowings from the banking system.

The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.

The T-bills are short-term investment tools issued through auctions, conducted by the central bank on behalf of the government.

Furthermore, five government bonds, with tenures of 02, 05, 10, 15 and 20 years, are traded on the market.

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Dhaka, Bangladesh (BBN)

The selling of the US dollar by the central bank has also helped dragging down the amount of surplus cash in the country’s banking system, senior officials of the Bangladesh Bank (BB) said.

The excess liquidity came down to around BDT 800 billion in September from BDT 940 billion, recorded three months before, they added.

The figure was nearly BDT 922 billion in September 2017.

However, the major portion of the excess liquidity has already been invested in the government-approved securities and BB bills as a risk-free investment for the banks, said the central bank officials.

Meanwhile, excess reserve, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, came down to BDT 50.72 billion in September from BDT 59 billion in June 2018.

Talking to the BBN, a BB senior official said the excess liquidity dropped significantly during the period despite the falling trend in the private sector credit growth.

The credit growth to the private sector came down to 14.67 per cent in September 2018 on a year-on-year basis from 14.95 per cent a month ago. It was 15.87 per cent in July 2018.

The existing trend in excess liquidity may continue until the new government takes power, the central banker explained.

On the other hand, the currency outside the banking system rose by 11.39 per cent or BDT 156.92 billion to BDT 1,533.95 billion in August from BDT 1,377.02 billion a month ago, the BB data showed.

Such type of currency was BDT 1,478.23 billion in August 2017.

Senior bankers, economists and experts, however, expressed concern over high growth currency outside the banking system, saying that flow of funds in excess of normal volume in the banking system will largely help meet the growing demand for liquidity.

The presence of more than usual amount of currency outside the banking system has also affected the deposit growth than that of credit in the recent months, according to banking-sector insiders.

Besides, the widening gap between credit and deposit growth continued in 2017 as many people with surplus funds stayed away from banks due to lower interest rates, the market insiders explained.

The deposit growth had been on a slide, falling from 13.13per cent on December 31, 2016 to 10.94 per cent on June 30, 2017 and 10.62 per cent on December 31 last.

Such trend of deposit growth continues till September this calendar year, according to the BB’s confidential report.

The deposit growth came down to 10.25 per cent as on September 27 from 11.29 per cent as on June 30, 2018. It was 10.51 per cent as on March 29, this calendar year.

On the other hand, lower deposit pushed down credit growth at 13.82 per cent in September from 16.75 per cent three months ago. It was 17.38 per cent in March 2018, the report added.

There are different views about the problem, ranging from the hoarding of currencies as ‘mattress money’, manipulation of invoices for both capital and other goods by using different techniques, and purchase of foreign currencies from unofficial channel -- generally known as kerb market -- to transfer funds outside the country using illegal channels.

Besides, a substantial amount of funds has been kept aside from the banking channel deliberately with a view to spending the same during the upcoming general election, it is suspected.

Sources, however, said informal markets have been operating in Thailand, Singapore, Malaysia, Pakistan and a number of other countries, particularly involving exchanges of 1000-and 500-denominated Bangladesh Taka (BDT), besides India.

However, the official sources wouldn’t agree with the contentions about the flight of the local currency for use in informal markets abroad. They say the BDT is not convertible under capital account.

But the sources did not contest the view about some amount of the money lying outside the banking system being used to buy particularly the cash US dollar from the informal market during the period to avoid the hassle of taxmen as well as the existing anti-money-laundering act.

Bankers are now asked to submit suspicious transaction report (STR) and cash transaction report (CTR) to the Bangladesh Financial Intelligence Unit (BFIU) of the central bank timely as a way of curbing money laundering and terrorism financing.

The banks have to report any single transaction worth BDT 1.0 million and above in form of withdrawal or deposit to the BFIU as per the existing provisions.

The demand for the greenback on the kerb market has increased because of such practices, pushing up the exchange rate of the US dollar against the BDT.

The greenback has sold at more than BDT 86.00 on the informal market recently. It was BDT 83.00-BDT 84.00 six months before, according to a currency trader.

Under the rule of thumb, rates of the dollar normally increase on the kerb market when unofficial transactions like smuggling and manipulations of invoices take place, they added.

Economists and experts said inflation, particularly non-food one, may creep up in the coming months following the use of such currency centring the upcoming elections.

A portion of such currency may be pumped back into the banking channel in the form of donation, gift and other modes of transactions before and during the elections, they noted.

The demand for local currency may pick up if the amount of currency outside banks remains almost unchanged in the near future, they said.

“A large portion of such money may use for consumption purposes, pushing up the inflationary pressure on the economy in the near future,” Mustafa K Mujeri, former director-general of the Bangladesh Institute of Development Studies (BIDS), explained.

Mr. Mujeri, also former chief economist at the central bank, feared price level may increase if such money is used ahead of the elections.

Talking to the BBN Syed Mahbubur Rahman, Chairman of Association of Bankers, Bangladesh (ABB) said the demand for the Bangladesh Taka (BDT) may pick up in the coming months if the excess liquidity maintains a declining trend.

Mr. Rahman, also managing director and chief executive officer (CEO) of Dhaka Bank Limited, said the interest rate on deposits is now increasing gradually, which may continue if the situation on excess liquidity does not improve shortly.

The overall situation on deposit may improve gradually as the central bank had taken different measures including slashing the limit of advance-deposit ratio (ADR) recently.

The ADR of all banks is re-fixed at 83.50 per cent for conventional banks and at 89 per cent for shariah-based Islamic banks. The existing ratios are 85 and 90 respectively.

The banks have to make adjustment gradually by March 31, 2019.

Earlier the bankers cut down their interest rates on deposits, particularly long-term ones, collectively, which was bad.

Depositors, particularly small ones, have lost interest in making further deposit with the banks mainly due to lower interest rates on deposits and prefer to invest in the government savings instruments, according to the experts.

Besides, the falling trend in the interest rates on deposits has affected the saving habit of the people, prompting them to spend on consumption, they explained.

They also said a growing number of loan scams that occurred in both public and private commercial banks triggered panic among people, which ultimately leads to a lack of confidence in the safekeeping of their hard-earned money.

In this situation, the banks have been advised to avoid ‘aggressive’ lending for minimizing credit risks.

The banks should invest in productive sectors moving out from the less-productive ones to help in achieving maximum economic growth by the end of this fiscal year.

BBN/SSR/AD

Retailers trade at Dhaka Stock Exchange office. BBN file photo

Dhaka, Bangladesh (BBN) - Bangladesh’s stocks rebounded last week that ended on Thursday as investors showed their buying appetite on large-cap issues.

Analysts said most of the investors were active on sector specific stocks throughout the week while some were busy with rebalancing their portfolios based on latest quarterly earnings results.

However, a section of investors closely eyeing on the country’s political situation as the national election nears, they said.

The week featured four trading sessions as usual and all four sessions closed green.

DSEX, the prime index of the Dhaka Stock Exchange (DSE), went up by 61.32 points or 1.17 percent to settle the week at 5,306.

Two other indices—the DS30 index and the DSE Shariah Index (DSES)–also ended higher.

The DS30 index, comprising blue chips, rose 12.85 points to finish at 1,869 and the DSE Shariah Index advanced 19.44 points to close at 1,227.

Total turnover, however, fell to BDT 26.29 billion on the DSE which was BDT 27.65 billion in the week before as last week saw four sessions instead of previous week’s five.

The daily turnover averaged BDT 6.57 billion, registering an increase 19 per cent over the previous week’s average of BDT 5.52 billion.

International Leasing Securities said the market ended higher riding on the news that Investment Corporation of Bangladesh (ICB) raised BDT 7.50 billion from the issuance of subordinated bonds as part of its market supportive measures.

Investors increased concentration on the bank, pharma and financial institutions sector stocks took the core index to its one month high to 5,306, said the stockbroker.

The stockbroker noted that some of the investors were reshuffling their investment based on latest quarterly earnings disclosures.

The textile sector continued to dominate the week’s turnover chart, grabbing 21 percent of the week’s total turnover. It was followed by the pharmaceuticals with 17 percent and power 14 percent.

The market capitalisation of the DSE advanced 0.44 percent to BDT 3,830 billion, from BDT 3,813 billion in the week before.

Among the major sectors, pharmaceuticals posted the highest gain of 3.32 percent, followed by food with 1.56 percent, banking 0.91 percent and financial institutions 0.57 percent.

Power sectors witnessed the highest correction of 2.92 percent, followed by telecommunication with 1.0 percent and engineering 0.23 percent.

A listed company - Keya Cosmetics recommended 10 percent stock dividend for the year ended on June 30, 2018.

Of the 346 traded issues, 163 closed higher, 154 ended lower and 29 issues remained unchanged on the DSE floor last week.

United Power topped the week’s turnover chart with 3.65 million shares worth BDT 1.16 billion changing hands during the week.

The other turnover leaders were Khulna Power Company, Intech, Saiham Textile and Brac Bank.

Kattali Textile was the week’s best performer, posting a gain of 25.48 percent while Monno Jute Stafflers was the worst loser, losing 71.68 percent, following its price adjustment after record date.

The port city’s bourse, Chittagong Stock Exchange (CSE), also ended higher with its CSE All Share Price Index - CASPI –gaining 229 points to settle at 16,284.

The Selective Categories Index - CSCX – also rose 146 points to close the week at 9,875.

BBN/SSR/SR

Chittagong port of Bangladesh

Dhaka, Bangladesh (BBN)- Bangladesh overall trade deficit reached nearly $4.0 billion in the first quarter (Q1) of this fiscal year due mainly to higher import payments than lower export receipts.

The gap in the country’s trade with the rest of the world rose to $3.85 billion in the July-September period of fiscal year (FY) 2018-19 from $3.65 billion in the same period of FY 18.

The deficit registered 5.53 per cent growth during the period under review, according to the central bank’s latest statistics.

Talking to the BBN, a senior official of the Bangladesh Bank (BB) said higher export growth helped reduce the trade deficit during the period under review.

Export earnings rose by 14.01 per cent to $9.75 billion during the Q1 of FY ‘19 against $8.55 billion in the same period of FY ‘18.

On the other hand, the overall import grew by 11.48 per cent to $13.60 billion during the same period.

It was $12.20 billion in the same period a year earlier, the BB data showed.

The central banker also expects that the trade deficit may narrow down further in the coming months if the rising trend of export earnings continues.

Meanwhile, the overall export earnings jumped by 30.53 per cent to $3.71 billion in October 2018 from $2.84 billion in the same month of 2017, The Export Promotion Bureau data showed.

Senior bankers, however, said the overall imports may maintain ‘slower growth’ because of the upcoming election but higher imports of fuel oil may continue.

“Most of the businessmen are now adopting a ‘wait-and-see’ policy in setting up fresh industrial units for expanding their business ahead of the general election,” Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh (ABB), told the BBN.

The existing downward trend in capital machinery imports may continue ahead of the polls, added Mr Rahman, also managing director and chief executive officer of Dhaka Bank Limited.

Import of capital machinery or industrial equipment used for production, dropped by 3.39 per cent to $1.24 billion in the Q1 of FY 19 from $1.29 billion in the same period of the previous fiscal.

On the other hand, higher export earnings growth along with an upward trend in remittance inflows has helped reduce current-account deficit during the period under review.

Bangladesh’s current-account deficit came down to $1.35 billion during the July-September period against $1.82 billion a year ago, the BB data showed.

The inward remittance, however, increased by 14.10 per cent to $3.87 billion in the Q1 of this fiscal from $339 billion in the same period of the FY 18.

The BB data showed the country’s overall balance of payments (BoP) is still in negative territory despite lower current-account deficit.

The BoP deficit rose to $720 million in the first three months of FY ‘19 against $360 million in the same period last year.

Talking to the BBN, another BB official said lower surplus in the financial account has pushed up the overall BoP in the Q1 of FY 19.

Surplus in the financial account came down to $793 million during the July-September period of FY ‘19 from $1.59 billion the year before.

“Surplus in the financial account dropped significantly mainly due to fluctuation of assets and liabilities of the commercial banks,” the central banker explained. “It may improve shortly.”

The higher inflow of foreign direct investment (FDI) has continued during the period under review, although portfolio investment deceased slightly.

The gross FDI inflow grew by 7.95 per cent to $720 million in the Q1 of FY 19 from $667 million in the same period of FY 18.

Besides, the net FDI inflow increased 9.63 per cent to $330 million from $301 million.

On the other hand, portfolio investment came down to $29 million from $157 million.

BBN/SSR/AD

Dhaka, Bangladesh (BBN)

Net sales of savings instruments rose to BDT 134.12 billion during the July-September period of the FY 2018-19 from BDT 126.94 billion in the same period of the previous fiscal, according to the data available with Department of National Savings (DNS).

During the period under review, the net sales of savings tools exceeded more than 50 per cent of the total target set by the government earlier for the FY 19.

The current fiscal year's total target for net borrowing from savings instruments was set at BDT 261.97 billion.
Higher yield on the savings instruments pushed up it sales in the recent years, according to insiders.

As the people do not have better investment options, they prefer the tools to utilise their hard-earned money, they said.

The government's interest payment is also increasing simultaneously due to huge investments in the savings tools.

The government paid BDT 54.36 billion as interest in the first three months of FY 19, according to the official figures.

However, the government has no immediate plan to curb investment in its savings instruments through reducing the yield on the sachems.

Besides, the government is planning to introduce a database of savings certificates from early next fiscal year, officials said.

After introduction of the databank, NIDs will be made mandatory for the savers to invest their money in these savings instruments, they added.

Due to higher yield on the tools, many savers are investing their money especially in Family Savings Certificates using the names of their different female members.

The DNS always encourages small savers as the aim of the savings certificates is to ensure financial security for lower and medium income groups.

The DNS sells four types of savings certificates and the yield on the tools are up to 11.76 per cent.

An individual is allowed to buy family savings certificates up to BDT 4.5 million. The thresholds for other schemes, including pensioners, are between BDT 5.0 million and BDT 6.0 million.

It also sells different types of bonds for expatriate Bangladeshis.

Better yield on the savings instruments than bank deposits are encouraging the small savers to invest more in the risk-free instruments.

Currently, average interest rate on deposit, offered by the commercial banks, is around 6.0 per cent, while the rate for savings instruments is paid on an average nearly 12 per cent, according to the market operators.

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