Dhaka, Bangladesh (BBN)

The inflow of funds improved in the market during the period under review as impact on disbursement of the government funds as well as cash deposit with banks in the last week of June.

On the other hand, overall turnover crossed BDT 95 billion-mark in the last week following higher inflow of find in the market, market insiders said.

Some banks still prefer to invest their fund in other forms including deposit to other cash-hungry banks instead of call money market, they added.

The volume of overall transactions in the market rose to BDT 95.21 billion on Thursday from BDT 70.17 billion a week ago, according to the central bank’s latest statistics.

On the other hand, the weighted average call money rose to 4.33 per cent on Thursday from 2.32 per cent 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.

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Dhaka, Bangladesh (BBN)

Per gram of 22-carat gold was fixed at BDT 4,400, up by BDT 100 from the previous price set at the end of January 2019, traders said.

“We’ve revised the gold prices upward, considering a continuous price hike of the metal in the international market and bullion in the local market,” Dilip Kumar Agarwala, general secretary of Bangladesh Jewellers’ Samity (BAJUS), said in a statement.

As per the revised prices, per gram of 21-carat and 18-carat gold is being sold at BDT 4,200 and TBDT 3,770 respectively, up by BDT100 from the previous rates.

The price of traditional category of gold remains unchanged at BDT 2,365 per gram while that of 21-carat (cadmium) silver at BDT 90 per gram.

According to traditional measure at Bangladeshi jewellery shops, the price of 22-carat gold would be BDT 51,322 per bhori (11.664 grams).

The price of 23-carat platinum was fixed at BDT 5,500, the BAJUS added.

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Dhaka, Bangladesh (BBN)

Rising demand for liquidity ahead of Eid-ul-Fitr festival along with impact on closing of the fiscal year may push up the yield on the government securities, they added.

Besides, some banks particularly fourth-generation private commercial banks (PCBs) prefer to purchase the government securities to maintain SLR (statuary liquidity ratio) with the central bank.

Currently, the required SLR is 13 per cent daily for the conventional banks and 5.5 per cent daily for the Islamic Shari’ah-based banks of their average total demand and time liabilities.

However, the cut-off yield, generally known as interest rate, on 05-Year Bangladesh Government Treasury Bonds (BGTBs) rose to 7.46 per cent on Tuesday from 6.99 per cent of the previous auction held on April 09, according to the auction results, published by Bangladesh Bank (BB).

Talking to the BBN, a BB senior official the yield on the BGTB was re-fixed as per the market requirements.

He also said an upward trend in overall interest rates is pushing up yield on the government securities.

The government borrowed BDT 7.0 billion through reissuing its 05-Year BGTBs on Tuesday.

Senior bankers, however, said higher rates on deposits have pushed up the yield on the government securities that may continue in the coming months.

Currently, the interest rates on term deposits are now hovering between 9.0 per cent and 11.50 per cent, they added.

Besides, different institutions including insurance companies and deposit insurance trust are also buying the government securities for maintaining regulatory requirements and compliance with trust act, they explained.

“An upward trend in the government bank borrowing may continue till June to meet its budgetary expenses,” an official familiar with the government debt-management activity, told the BBN in Dhaka.

The government used around BDT 20 billion as of May 12 borrowed under ways and means advances (WMAs) facility from the central bank on the same grounds.

The authorities are now empowered to borrow up to BDT 40 billion from the central bank under such facility to meet its day-to-day expenditures without issuing any securities.

The government is also entitled to borrow a maximum of BDT 40 billion under overdraft (OD) drawing facility from the central bank on the same grounds.

“But the government has yet to avail such facility from the BB,” the official noted.

On the other hand, the government has already revised its auction calendar for the month of May with keeping BDT 40 billion extra borrowing arrangement to meet its budget deficit.

As per the revised calendar, issued by the BB on Monday, the government may take up to BDT 88 billion as gross borrowing from the banking system this month by issuing treasury bills (T-bills) and bonds.

The government’s net bank borrowing is set to reach BDT 67.25 billion at the end of this month, after deducting BDT 30.75 billion as maturity amount of the government securities from the gross borrowing amount, according to the central banker.

Currently, four T-bills are transacted on auction to adjust government borrowing from the banking system.
The T-bills have 14-day, 91-day, 182-day and 364-day maturity period.

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

Five government bonds, with the tenure of 02, 05, 10, 15 and 20 years respectively, are also traded on the money market.

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Dhaka, Bangladesh (BBN)

A tripartite committee has already been formed to boost the country’s nascent bond market, particularly the corporate one, officials said.

The first meeting of the tripartite committee formed to submit recommendations for how to build a long-term debt market in Bangladesh was held at the central bank headquarters in Dhaka on Monday, with its chief Md Khurshid Alam in the chair.

The committee comprises senior officials of the BB, Bangladesh Security and Exchange Commission (BSEC) and senior private banker.

The meeting reviewed the latest overall bond market situation, suggesting providing incentives for both bond issuers and buyers in order to bring dynamism in the market.

Talking to the BBN, a senior member of the committee said they will fix the types of incentives that will be provided to bond issuers and buyers in the next meeting.

He also said the committee is trying to develop strategies for encouraging entrepreneurs to issue corporate bonds instead of receiving loans from commercial banks.

The corporate bond market in Bangladesh, however, remains at a nascent stage mainly due to disclosure rules and strict governance norms of the market, according to the central bankers.

For funds, corporate borrowers prefer to rely on banks instead of the bond market to avoid the need to comply with disclosure requirements and strict governance norms of market, they added.

The high cost of launching new debt products and high transaction cost of bond-registration fee, stamp duties, annual trustee fees and ancillary charges discourage entrepreneurs from issuing corporate bonds, they explained.

Currently, only one corporate bond -- Islami Bank Bangladesh Limited (IBBL) Mudarba Perpetual Bond -- is now traded on the country’s prime bourse, the Dhaka Stock Exchange (DSE).

However, the fund will be required to bridge the resource gap for achieving the 8.0 per cent plus growth within the timeframe to become a middle-income country, another BB official said.

The size of nominal gross domestic product (GDP) is estimated to reach BDT 32.78 trillion by the end of fiscal year (FY) 2020-21 while the resource gap will hit BDT 8.78 trillion, according to the central bank.

The Bangladesh Bank (BB) has calculated the resource gap taking into consideration the credit flow by banks, investment and fund flow from the capital market.

The banks are still a dominant financial system asset in Bangladesh, contributing more than 62 per cent of asset in 2018, while the capital market has contributed 16.50 per cent, the BB said in a study that was placed at a strategic planning meeting on February 09.

“In the absence of a sufficient large corporate bond market, an overly large burden of corporate lending is taken on by the banking system and creating maturity mismatch in the market,” the central bank said in the study report.

In such an environment, the over-sized banking system becomes a fertile ground for crony capitalism, resulting in lax lending criteria and relaxed investment standards by companies, it added.

“The BB needs to ensure the strict credit disciplining so that the undue benefits of obtaining bank loan do not exist,” recommended the study on ‘BB’s role in enabling corporate bond market’.

The central bank’s board as a forum of relevant key actors can take the leadership role in the development of the bond market, it noted.

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Dhaka, Bangladesh (BBN)

The turnover rose by BDT 63 million to BDT 7.13 billion in May 2018 from BDT 6.50 billion in the previous month, according to the central bank’s latest statistics.

In April, the turnover was a more-than-four-time fall from that in March, when the amount was BDT 27.78 billion.

“The turnover of the securities dropped significantly in the market mainly due to non-availability of the government-approved securities,” a senior official of the Bangladesh Bank (BB) told the BBN in Dhaka.

He also said the turnover of the securities may increase in the coming months as the government is set to borrow more from the banking system this month to finance budget deficit partly.

Commercial banks and non-banking financial institutions (NBFIs) are the main buyers of these fixed income government securities.

T-bills are short-term and Bangladesh Government Treasury Bonds (BGTBs) are long-term.

The secondary trading of T-bills and BGTBs in the first 11 months of the current fiscal year (FY) 2017-18 stood at BDT 152.11 billion, the BB data showed.

In the same period of the FY 17, the turnover was BDT 366.54 billion, which means the trading in monetary terms fell by 58.50 per cent during July-May period of this fiscal.

Currently, four 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.

Five government bonds, with the tenures of two, five, 10, 15 and 20 years respectively, are also traded in the market.

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Dhaka, Bangladesh (BBN) - Now that Bangladesh has graduated to developing country all efforts should be made to strengthen the banking sector which is the backbone of the economy.

The requirements and challenges of many to a developing country must not be ignored and the best way to do this is strengthening the capital & liquidity ratio of the banks, according to the editorial of the current News Bulletin (Jan-March-2018) of International Chamber of Commerce-Bangladesh (ICCB) released on Wednesday.

Non-Performing Loans (NPLs) is one of the issues that is impacting capital adequacy of the industry specially the eight state-owned commercial and specialized banks.

For decades, state-owned banks have been the prime leader to the large corporate borrowers particularly in the industrial sector of the economy.

The prerequisite for the economic development of a country is smooth and efficient flow of saving-investment process. Bangladesh, being a developing country and with an underdeveloped capital market, mainly depends on the intermediary role of commercial banks for mobilizing internal saving and providing capital to the investor. Thus, it matters how well our financial sector is functioning.

In Bangladesh six state-owned commercial banks account for about a quarter of total banking sector assets. They are supplemented by two state-owned specialized development banks, 40 private commercial banks and nine foreign banks.

Capital adequacy is the primary indicator of the banks’ financial fitness and stability. After successful implementation of Basel II guideline in regards to the adequacy of capital, Bangladesh Bank is now in the process of implementing Basel III guidelines which is an international regulatory framework for banks.

According to a Bangladesh Bank study five years (during CY2012 to CY 2016) average ratio of gross NPLs to total loans were about 27.1 percent, whereas, it was 4.9 percent for PCBs, 6.5 percent for FCBs and 22.56 percent for SCBs.

The percentage of classified loan to total outstanding stood at 10.1 percent in June 2016. The percentage was highest for the SBs 26.1 percent, for the PCBs 5.4 percent, for the SCBs 25.7 percent and for the FCBs 8.3 percent.

Until September 2017, total banking sector loan amounted to BDT 7,527.30 billion, of which BDT 803.07 billion or 10.67 per cent was bad debt. And if restructured or rescheduled loans were included, NPL in the banking sector goes up to 17 percent of total outstanding loans.

By the end of September, the total bad debt of SCBs stood at BDT 385.17 billion against the disbursed loans of BDT 1,316.89 billion (29.25% of disbursed loan); total bad debt of specialized Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank stood at BDT 55.18 billion against the disbursed loans of BDT 231.93 billion (23.79% of disbursed loan); PCBs had default loans of BDT 339.73 billion against the disbursed loans of BDT 5,687.32 billion (5.97% of disbursed loan) and FCBs had bad debt of BDT 22.98 billion against the disbursed loans of BDT 291.16 billion (7.89% of disbursed loan).

Naturally, these high NPLs have affected the profitability and the overall capital to risk weighted assets ratio (CRAR), a key measure of bank strength and stability.

According to The Economist's Intelligence Unit, The CRAR at private banks was 12.2%, while that at the nine foreign banks was a healthy 23.9% , the six state-owned commercial banks was only 5.9% and that of the two specialised state-owned banks was an astonishing -35.23%.

Further bad loans are routinely restructured to permit further lending to the same borrowers. According to a study by the Bangladesh Institute of Bank Management (BIBM) an average banks rescheduled bad loans of Tk109.1bn annually during 2010–14.

According to a meeting of the parliamentary standing committee on finance ministry at the Jatiya Sangsad Bhaban on February 28 the amount of defaulted loans of top 25 defaulters stood at BDT 96.96 billion as of September last year.

The central bank submitted the list at parliamentary standing committee suggested forming a joint committee comprising BB and finance ministry officials.

In contrast, to recapitalize banks over the past few years the government has provided large amounts to the sector.
In the budget 2017/18 the government has earmarked BDT 20bn to recapitalise state-owned banks. The decision to provide funding has been criticized by the experts. As despite the regular infusion of budget funds, state-run banks have not improved their NPL positions.

Until now, only limited action has been taken to penalise defaulters, improve risk management and strengthen bank management. To tackle the sector's deep-rooted problems of corruption and poor risk practices further efforts needed.

BBN/SSR/AD

Dhaka, Bangladesh (BBN)- The central bank of Bangladesh has sold US$27 million more to 10 commercial banks to meet the growing demand for the greenback in the market.

“We’ve sold the foreign currency to the banks on Tuesday at market rate to settle import payment bills particularly for fuel oils, food grains and fertilizers,” a senior official of the Bangladesh Bank (BB) told the BBN in Dhaka.

He also said the central bank may continue providing such foreign currency support to the banks in line with the market requirement.

The US dollar was quoted at BDT 82.96 in the inter-bank forex market on the day unchanged from the previous level, according to the market operators.

The central bank of Bangladesh has resumed giving the support in the recent months through selling the US currency to the banks directly to keep the market stable.

A total of $1.75 billion was sold to the commercial banks since July 01 of this fiscal year, 2017-18, as part of its ongoing support, according to BB’s latest data.

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Dhaka, Bangladesh (BBN)- Sustainable and uninterrupted energy is critical for the economic growth, International Chamber of Commerce-Bangladesh (ICCB) said.

The per capita energy consumption in Bangladesh is one of the lowest in the world (433 KWH as of October 2017). The installed capacity of Bangladesh in 1972 was only 200 MW. Since then, the current power generation has increased to 16,046 MW with 600 MW import from India, according to the editorial of the current News Bulletin (Oct-Dec 2017) of the ICCB, released on Sunday.

The capacity has increased due to favorable government policies, which have attracted private investment and Independent Power Producers (IPP).

They are now producing 46 per cent of total power in Bangladesh. Though the government has achieved significant success in electricity generation, actual capacity utilization is 9,507 MW only due to vulnerable and double-digit system loss prevailing in the distribution mechanism.

The Power Sector Master Plan (PSMP) 2015 has a target of 57,000 MW generation by 2041 – 35 per cent coal based, 35 per cent Gas and LNG based and remaining 30 per cent would come from nuclear power, power import and renewable energy.

Of the 30 per cent, about 5.0 per cent would come from imported oil, 5.0 per cent from nuclear and the remaining 20 per cent from renewable energy.

The government has decided to import LNG for the proposed 15,300 MW LNG-based power generation plants. Contracts have already been signed with private sector operators for 7.0 million tonnes (1000MCFD) of annual LNG import.

Also, works are in progress for 22,000 MW imported coal-based power generation by 2041 for which about 66 million tonnes of coal would be needed annually.

The government has taken the initiative for setting up a coal transfer terminal at Matarbari with a capacity of 40 million tonnes annually.

Also, the construction work of the 1,200MW Rooppur Nuclear Power Plant, the first such plant in the country has formally started on 30 November.

The government will import coal despite the fact that Bangladesh has an estimated reserve of some 3.0 billion tonnes of high-quality coal in five coalfields in northern districts.

Experts and the members of the parliamentary standing committee on energy affairs have lent their support for open-pit mining as it is risk-free and cost-effective. But the authorities are reluctant to go ahead with the option of open-pit mining fearing a backlash from the opponents of the system.

Even though the commitment to restrict funding for coal exploration, other Asian nations including China, India, Japan, the Philippines and Vietnam are increasingly prioritising coal to strengthen their economies too. China, India and Indonesia now burn 71 per cent of the world's newly mined coals, according to the World Coal Association.

The failure to adequately manage the load shedding, there is a severe disruption in the industrial production and other economic activities. A recent survey reveals that power outages result in a loss of industrial output worth $1 billion a year which reduces the GDP growth by about half a percentage point in Bangladesh.

It is estimated that the total transmission and distribution losses amount to one-third of the total generation, the value of which is equal to the US $247 million per year.

Therefore, there is a need for the development of appropriate infrastructure and effective monitoring system to overcome the major hurdle in efficiently delivering power.

South Asia’s considerable hydropower potential is concentrated in the Himalayan region, spanning Nepal, Bhutan and India’s northernmost states.

Nepal alone has theoretical hydropower potential of 83,000 MW, but so far, less than 2.0 per cent has been realized while Bhutan has an estimated hydropower capacity of around 30,000 MW.

Bangladesh may explore the possibility of joining Nepal and Bhutan in tapping the vast hydropower resources, the ICCB recommended.

Due to fast depleting gas reserve and lack of major initiatives to develop local coal it is becoming difficult to achieve a sustainable local primary energy source.

According to an estimate, Bangladesh would become 92 per cent dependent on imported fuel by 2030 if local coal is not explored and exploited.

Generation of electricity in coal-fired power plants will be viable and much cheaper if locally explored quality coal is used as fuel instead of imported one.

Bangladesh should, therefore, go for all-out commercial exploration of coal in the next five years to make the power sector, the backbone of the country's economy, sustainable and vibrant.

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.

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