Bangladesh Finance Minister AMA Muhith. BBN file photo

Dhaka, Bangladesh (BBN) – Cash Reserve Requirement (CRR) will be slashed by 1 percent from the existing 6.50 percent to help solving the ongoing liquidity crunch in the banking system of Bangladesh.

The decision was taken at a tripartite meeting among the Ministry of Finance, Bangladesh Bank and Bangladesh Association of Banks (BAB) held at a local hotel in Dhaka on Sunday.

“The CRR will be cut by 1 percent to improve the liquidity situation that also help bringing the interest rate on lending at single digit from the existing level,” Finance Minister AMA Muhith told reporters after the meeting.

Earlier on Friday, the private bank leaders requested the finance minister to reduce the CRR by 3.0 percent.

They also wanted to bring the interest rate on loan to single digit.

The private bank leaders made the appeal during a closed-door meeting between the members of BAB and the finance minister.

The CRR cut measure will help banks to get an additional BDT 300 billion in liquidity, said Nazrul Islam Mazumder, chairman of the BAB, during the meeting.

“A huge amount of fund is now stuck in the central bank in the form of cash reserve requirement. The fund cannot be invested and it does not play any role in containing inflation,” Mazumder said.

The interest rate on lending will come down to a single digit again if the central bank cuts the CRR, he added.

As per the Friday’s decision, today’s tripartite meeting was held.

BBN/SS/AD

Bangladesh Bank Headquarters

Dhaka, Bangladesh (BBN) - The central bank of Bangladesh slashed the limit of advance-deposit ratio (ADR) on Tuesday to help check any possible liquidity pressure on the market due to the banks’ ‘aggressive’ lending.

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

The banks must adjust it gradually by June 30, according to a notification, issued by the Bangladesh Bank (BB), the country’s central bank, on the day.

The banks have been instructed to submit their specific action plans in this connection to the Department of Off-site Supervision (DOS) of the central bank by February 7, it noted.

Talking to the BBN, a senior official of the BB said the central bank will monitor the action plans to ensure implementation of the revised ADR directive within the stipulated timeframe.

He also said BB has re-fixed the ADR considering different indicators, including inter-bank dependence, classified loan situation and capital adequacy of the banks.

The central bank’s latest move came against the backdrop of credit growth at a higher rate than that of deposit in the recent months, as depositors are feeling discouraged from keeping money with the banks because of lower interest rates.

The revised ADR limited will help bring an alignment between the existing credit and deposit growths, another BB official said, adding that it will also help bringing a credit discipline in the country’s banking sector.

The growth in deposit, on a year-on-year basis, rose to around 11 per cent in November 2017 from 10.72 per cent as on October 12, 2017, according to the BB officials. All-bank deposit growth was 13.13 per cent on December 31, 2016.

On the other hand, credit growth, particularly in private sector, increased significantly in the recent months due to higher trade financing by the banks for settling import-payment obligations.

Much of the money went for financing import of fuel oil, and consumer items including food grains and capital machinery.

The all-bank credit growth rose to 19 per cent in November from 18.05 per cent as on October 12, 2017. It was 15.32 per cent in December 31, 2016.

The ADR of all banks rose to more than 75 per cent in November 2017 from 74.85 per cent as on October 12, 2017. It was 71.85 per cent as on December 31, 2016.

BBN/SSR/AD

Grameen

Dhaka, Bangladesh (BBN)- The board of directors of Grameenphone (GP) has recommended 100 per cent final cash dividend for the year ended on December 31, 2017, said an official discourse on Tuesday.

The total dividend for the year 2017 will be 205 percent as country’s largest market cap listed company already paid 105 percent interim cash dividend for the year ended on December 31, 2017.

The final approval will come during the annual general meeting (AGM) scheduled to be held on April 19 at 10:30am at International Convention City, Bashundhara in Dhaka.

The record date is on February 19.

The company has also reported earnings per share (EPS) of BDT 20.31, net asset value (NAV) per share of BDT 26.10 and net operating cash flow per share (NOCFPS) of BDT 42.79 for the year ended on December 31, 2017 as against BDT 16.68, BDT 24.86 and BDT 34.18 respectively for the same period of the previous year.

In 2016, the company disbursed total 175 percent cash dividend.

There will be no price limit on the trading of the shares of the company today following its corporate declaration.
Each share of the company, which was listed on the Dhaka bourse in 2009, closed at BDT 510.30 on Monday at Dhaka Stock Exchange (DSE), gaining 0.98 percent over the day before.

The company’s paid-up capital is BDT 13.50 billion and authorised capital is BDT 40 billion, while the total number of securities is 1.35 billion.

The sponsor-directors own 90 percent stake in company, while institutional investors own 4.55 percent, foreign 3.42 percent and the general public 2.03 percent as on December 28, 2017, the DSE data shows.

BBN/SSR/SR

Bangladesh Bank Governor Fazle Kabir announcing new monetary policy for the January-June period of this fiscal on January 29, 2018. Photo: BBN

Dhaka, Bangladesh (BBN)- The central bank of Bangladesh has unveiled its new monetary policy aiming to contain inflation risk through squeezing excessive lending and improve financial stability.

“The new monetary policy targets employment-focused growth with stability,” Bangladesh Bank (BB) Governor Fazle Kabir said while announcing the monetary policy statement (MPS) for the January-June period of the fiscal year (FY) 2017-18 at a press conference held at the central bank headquarters in Dhaka on Monday.

The MPS for the second half of the fiscal is particularly aimed helping real sectors in achieving sustainable growth by holding in check inflationary pressures on the economy and discouraging money flow into less-productive sectors.

The central bank, however, kept unchanged its domestic credit (DC) target at 15.8 per cent for the second half (H2) of the FY 18 while target of broad money (M2) supply came down to 13.3 per cent from previous 13.9 per cent.

“Although broader monetary policy targets (M2, DC) have been redesigned cautiously to support growth while balancing inflationary risks, vigilance and continuous monitoring is required as the monetary programme and economic development unfold,” the MPS explained.

On the other hand, the BB enhanced its private-sector credit-growth target to 16.8 per cent against a previous projection of 16.3 per cent.

The revised private-sector-credit-growth target is significantly lower than that of the existing level at 18.13 per cent in December 2017.

The latest revision came against the backdrop of rising trend in the private-sector-credit flow in the recent months due to higher trade financing for settling import-payment obligations, particularly for food- grains, fuel oils and capital machinery.

The BB also projected that the country’s overall trade deficit would hit a record $13 billion by the end of this fiscal due to higher import payments against lower export earnings.

However, repo and reverse repo policy interest rates will, for the time being, remain unchanged at 6.75 and 4.75 per cent, respectively, according to the new MPS.

The BB governor also announced that the limit of advance-deposit ratio (ADR) of the banks would be rationalized within a couple of days.

“The revised limit of ADR will come into effect from June this year,” the central bank chief said, without disclosing the limit.

Sources, however, said the ADR of all banks is likely to be re-fixed at 83 per cent for conventional banks and at 89 per cent for shariah-based Islamic banks. The existing ratios are 85 and 90 respectively.

Earlier on January 04 last, the central bank hinted at a bankers’ meeting that the BB had planned to slash the advance-deposit ratio (ADR) to help check any possible liquidity pressure on the market due to ‘aggressive lending’.

The macro-prudential steps to curb imprudent unproductive lending would include closer surveillance on adherence to prescribed Asset-Liability Management (ALM) and Forex Risk Management guidelines, a new directive requiring banks to rationalise their ADR to curb their overexuberance in lending, and stricter end-use surveillance on bank loans including import-financing commitments.

“The revised limit of ADR will be fixed considering the banks’ capital adequacy and non-performing loans (NPLs),” Mr. Kabir said while replying to another query on the same issue.

The BB governor also rolled out a four-point programme for bringing dynamism in both the country’s financial and capital markets during the period.

Under the programmes, the banks have been asked to avoid unduly high medium-or long-term investment-financing exposures to corporate borrowers, helping instead in corporate bond issuance on the capital market, using banks only as interim bridge-financing windows.

The banks will be encouraged to mobilize foreign savings of Non-resident Bangladeshis (NRBs) through sales of government’s high- yielding Wage Earners Bonds. And handling their portfolio investments with Non-resident Investment Taka Accounts (NITAs) for NRBs will help further augment foreign-exchange inflows, simultaneously adding equivalent Taka liquidity on the financial and capital markets.

Work underway on further simplifying banking-channel transaction procedures relating to export of goods and services through internet-based e-commerce platforms that will also help further in augmenting forex inflows, according to the MPS.

Besides, the existing close monitoring and supervision will be continued to curb illegal money transfers using mobile phones.

The MPS also said preventive and punitive steps against the abuse of mobile phone accounts in illegal hundi operations are also shoring up banking channel remittance inflows.

“….H2 of the FY18 monetary programme retains domestic credit- growth ceiling unchanged at 15.8 per cent, adequate to accommodate the targeted 7.4 per cent real GDP (gross domestic product) growth and up to 6.0 per cent annual average CPI inflation,” it noted.

The country’s average inflation as measured by consumer-price index (CPI) rose to 5.70 per cent in December last from 5.64 per cent of the previous month due to higher food prices while point-to-point inflation also fell to 5.83 per cent from 5.91 per cent in November 2017.

The central bank’s projections show average inflation to be around 5.7- 6.0 per cent in June 2018, assuming no further domestic or external shocks and a relatively favorable global inflation outcome.

During the remainder of the FY 18, food-inflation pressure will ease from imports and boro rice harvests, according to the MPS.

The government as well as the central bank had set the inflation target at 5.5 per cent for the FY 18.

The central bank is encouraging the banks to get rated by internationally reputable credit-rating agencies, which can help improve competition and governance, and market access.

“Continued improvement in intensive and intrusive supervision that can upgrade corporate governance and lower concentration risks and NPLs would support a more efficient monetary policy transmission mechanism,” the MPS noted.

Among others, Change Management Adviser of the BB Allah Malik Kazemi, BB deputy governors Abu Hena Mohammad Razee Hassan and SK Sur Chowdury and chief economist Faisal Ahmed spoke on the occasion.

BBN/SSR/AD

Bangladesh Bank Headquarters

Dhaka, Bangladesh (BBN) - The central bank of Bangladesh is set to unveil its second-half (H2) yearly monetary policy on Monday to achieve maximum economic growth through ensuring the quality of credits, officials said.

Bangladesh Bank (BB) Governor Fazle Kabir will announce the monetary policy statement (MPS) at 2:30 pm on the day for the January-June period of the fiscal year (FY) 2017-18 to help real sectors for achieving sustainable growth with curbing inflationary pressures on the economy.

“We’re formulating the MPS giving top priority to facilitate investment through increasing credit flow particularly in the real economic sectors,” a BB senior official told the BBN in Dhaka.

He also said the central bank will facilitate credit flow to the productive sectors for achieving 7.40 per cent GDP (gross domestic product) growth by the end of this fiscal.

Existing liquidity situation, movement of stock market and exchange rate position will be included in the MPS, the central banker explained.

The ongoing upward trend in fuel oils, other essential commodities prices in the global market, possible inflows of remittance and export earnings are expected to focus in the next MPS.

Talking to the BBN, another BB official said the central bank is trying to curb the ongoing inflationary pressures on the economy carefully ahead of the next general election.

Bangladesh’s average inflation as measured by consumers' price index (CPI) rose to 5.70 per cent in December last from 5.64 per cent of the previous month while point-to-point inflation rate also fell to 5.83 per cent from 5.91 per cent in November 2017. The government as well as the central bank had set the inflation target at 5.5 per cent for the FY 18.

In the next MPS, the central bank will also give emphasis on boosting SME and agriculture loans along with microcredit to create employment opportunities across the country, according to the BB officials.

They also hinted that the private sector credit growth target will re-fix considering the overall latest trend of the economy that will help achieving maximum growth by the end of this fiscal.

Earlier on January 07 last, senior officials of the BB at a preparatory meeting emphasised ensuring the quality of credits through strengthening the monitoring and supervision by both the central bank and the commercial banks themselves.

Meanwhile, the private sector credit growth fell significantly in December after a rising trend in last two consecutive months as most banks tried to comply with advance-deposit ratio (ADR) rules properly.

The growth in credit flow to private sector came down to 18.13 per cent in December 2017 on a year-on-year basis from 19.06 per cent a month before, according to the central bank latest statistics.

The private-sector-credit growth was 18.63 per cent in October, 2017.

Such credit growth has already crossed the target, set by the central bank of Bangladesh in its outgoing monetary-policy statement earlier.

Earlier on July 26 last, the central bank projected in its H1 monetary policy for the FY 18 that the private-sector credit would grow at 16.2 per cent in December 2017 and 16.3 per cent in June 2018 respectively.

BBN/SSR/AD

Dhaka, Bangladesh (BBN)- Country’s private sector credit growth fell significantly in December after a rising trend in last two consecutive months as most banks tried to comply with advance-deposit ratio (ADR) rules properly.

The growth in credit flow to private sector came down to 18.13 per cent in December 2017 on a year-on-year basis from 19.06 per cent a month before, according to the central bank latest statistics.

The private-sector-credit growth was 18.63 per cent in October, 2017.

Close monitoring by the Bangladesh Bank (BB) to minimise gap between advances and deposit growth pushed down the flow of credit to the private sector during the period under review, according to the bankers.

They also said the banks were more focused on managing liquidity ratios than in increasing loan book so that numbers look better at the close of year.

“We’ve tried to keep the key indicators including ADR within the regulatory requirements in December as part our balance sheet management,” a senior executive of a leading private commercial bank (PCB) told BBN in Dhaka.

The central bank has expedited its monitoring and supervision since November last calendar year to improve deposit growth than credit one to help check any possible liquidity pressure on the market.

As part of the moves, the BB blocked funds from current accounts of two private commercial banks due to none- compliance with ADR rules in the recent months.

The latest BB moves to tighten belt came against the backdrop of raising trend in credit growth outstripping that of deposit in the recent months.

The growth in deposit, on a year-on-year basis, rose to around 11 per cent in November last from 10.72 per cent as on October 12, 2017. It was 13.13 per cent on December 31, 2016.

The all-bank credit growth rose to 19 per cent in November last from 18.05 per cent as on October 12, 2017. In was 15.32 per cent in December 31, 2016.

Credit growth, particularly in private sector, increased significantly in the recent months due to higher trade financing by the banks for settling import-payment obligations particularly for financing fuel oil, consumer items including food-grains and capital machinery.

Such credit growth has already crossed the target, set by the central bank of Bangladesh in its outgoing monetary-policy statement earlier.

Earlier on July 26 last, the central bank projected in its first half-yearly (H1) monetary-policy statement for the current fiscal year (FY) 2017-18 that the private-sector credit would grow at 16.2 per cent in December 2017 and 16.3 per cent in June 2018 respectively.

The total outstanding loans with the private sector rose to BDT 8470.22 billion in December last from BDT 8269.44 billion in November 2017. It was BDT 7170.19 billion in December 2016.

BBN/SSR/AD

Bangladesh Bank Headquarters

Dhaka, Bangladesh (BBN) - The central bank of Bangladesh sees the banking sector faced some pressures from asset quality, particularly in the state owned banks, and tighter liquidity in some of the fourth generation private banks.

The gap between credit and deposit growths in a low interest environment helped absorb the existing excess liquidity in the banking system, according to the latest Bangladesh Bank Quarterly (BBQ) assessment for July-September 2017.

“Liquidity conditions in the banking system remains 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,” the BBQ explained.

Meanwhile, growth in private sector credit was on an upward trend and reached 17.9 per cent in September 2017, exceeding the Bangladesh Bank (BB)'s FY (fiscal year) 2017-18 target. The large share of the credit went in to industry, construction and transport sectors.

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

The central bank of Bangladesh 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 noted.

The BBQ 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.”

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, according to the BBQ.

It also said: “Wider trade deficit, coupled with improving but modest remittance growth, led to a deficit in overall BoP in the Q1 of FY18.”

The BBQ further said the pace of economic activities remained robust in the first quarter of FY18, aided by rapid private credit growth, a rebound in remittance inflows, and a pick-up in export growth.

On the supply side, growth momentum was strong in the industry and the service 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, reaching 5.6 percent in Q1FY18, slightly exceeding the FY18 target of 5.5 percent.

“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 in the global market led to elevated food prices in the domestic market,” it explained.

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 noted.

BBN/SSR/AD

BBN file photo

Dhaka, Bangladesh (BBN) - The exchange rate of Bangladesh Taka (BDT) depreciated by 15 paisa against the US currency at customer level on Monday for making import payments.

The exchange rate of the US dollar rose to BDT 83.35 for Bill for Collection (BC) selling on the day from BDT 83.20 of the previous working day, according to the market operators.

On the other hand, the BDT also deprecated slightly against the greenback on the same day for receiving inward funds, they added.
The banks quoted US dollar at BDT 82. 35 on the day against BDT 82.20 of the previous working day to the remitters for telegraphic transfer (TT) clean of their funds, they added.

However, the exchange rate of BDT remained unchanged against the US dollar in the inter-bank foreign exchange market on  Monday.

The US dollar was quoted at BDT 82.88 unchanged from the previous level, the market operators added.

The market insiders said imports will be costlier in the near future following depreciation of the local currency, while remitters and exporters will be gained slightly.

BBN/SSR/AD

Farmers Bank MD AKM Shameem

Dhaka, Bangladesh (BBN) – Bangladesh Bank (BB) on Tuesday removed the Farmers Bank’s Managing Director (MD) and Chief Executive Officer (CEO) AKM Shameem on charge of his alleged liquidity crunch and loan disbursement bypassing its embargo.

The central bank has removed the Farmers Bank’s MD with imposing a bar from taking employment directly or indirectly at any banks for a period of three years, a BB senior official told the BBN in Dhaka immediately after the sending of the removal order.

The central bank has already sent the order to the authorities concerned of the Farmers Bank Limited for taking necessary action in this connection, he added.

BB Governor Fazle Kabir has issued the order as per recommendations of the central bank standing committee.

The central bank of Bangladesh earlier had formed a four-member standing committee, headed by its Deputy Governor Abu Hena Mohd Razee Hassan, to hear the MD's representations regarding his alleged loan disbursement bypassing its embargo and liquidity problem of the private commercial bank.

Earlier on November 26, the central bank issued a show-cause notice in line with the existing Banking Companies Act against the MD of the FBL asking him to explain why he should not be removed.

In the notice, the MD had been instructed to explain two issues: the ongoing liquidity problem of the bank and the fresh loan disbursement despite imposition of an embargo by the central bank.

The BB’s action came against the backdrop of higher credit growth than deposit that threw the new bank into liquidity crunch.

The FBL’s advances-deposit ratio — generally known as ADR — has crossed 85 percent for several months, which contravenes central bank’s rules, according to the BB officials.

The central bank of Bangladesh had earlier set the safe limit of ADR at 85 percent for conventional banks and at 90 percent for sharia-based Islamic banks.

On the other hand, a special inspection of the problem-ridden private commercial bank has been continued to assess its real financial health, after heads rolled over a crisis of the trouble-hit fourth-generation bank.

Two of the branches — Gulshan and Motijheel — along with the FBL’s headquarters, have already been investigated by the central bank inspectors.

The inspectors are now scrutinising the assets quality of the bank, the sources confirmed.

They also said the inspection report is likely to be submitted to the authorities concerned by the end of next week.

On 27 November, the board of directors of the FBL was restructured with the election of a new chairman and a vice-chairman of the bank.

Mohammad Masud and Maruf Alam have been elected chairman and vice-chairman respectively of the private bank.

On the same day, ruling Bangladesh Awami League MP Dr. Muhiuddin Khan Alamgir, also a former minister, resigned as the FBL chairman. The bank’s audit-committee chairman and director, Mahabubul Haque Chisty (Babul Chisty), also relinquished his position.

The central bank appointed an observer to the FBL on January 13, 2017 for improving its financial health through strengthening monitoring and supervision of the bank’s operations.

BBN/SS/ANS

NRB Commercial Bank Managing Director and Chief Executive Officer Dewan Mujibur Rahman

Dhaka, Bangladesh (BBN) - The central bank of Bangladesh on Wednesday removed NRB Commercial Bank’s Managing Director (MD) and Chief Executive Officer (CEO) Dewan Mujibur Rahman on charges of violating rules and regulations in sanctioning loans.

Mr. Rahman was also barred from taking employment, directly or indirectly, at any banks for a period of two years, a senior official of the Bangladesh Bank (BB) told the BBN in Dhaka.

BB Governor Fazle Kabir has issued the order as per recommendations of the central bank’s standing committee.

The BB’s standing committee had recommended to the governor for removal of the NRB Commercial Bank Limited (NRBCBL) MD and CEO as the statement of Mr. Rahman was not accepted by it, the central banker explained.

"We've already sent the order to the chairman of the fourth generation private commercial bank for taking necessary action in this connection,” the BB official said while replying to a query.

BBN/SSR/AD