business
Strong political commitment, fundamental reforms needed to achieve fiscal revenue target: PRI
Renowned economist and Executive Director of PRI (Policy Research Institute) Dr Ahsan H Mansur on Sunday, at a pre-budget press briefing, said that only strong political commitment and fundamental reform of the National Board of Revenue (NBR) can improve the tax-GDP ratio in Bangladesh.
He said over Tk 3 lakh crore of budget expenditure went for loans’ interest payment, pension benefits, and social safety net program.
Mansur said despite having the potential, the gap between the target revenue and achievement is widened each fiscal Year (FY) due to the failure of existing revenue and taxation policies.
Without massive reform at banks, NBR, and other financial institutions and regulators, achieving the IMF set target in these sectors would be quite impossible, the economist observed.
Giving an example, he said in the last 9 months, Bangladesh Bank spent USD 12 billion from reserves, despite cutting imports by around 33 percent. This is happening due to controlling the exchange rate, he said.
Dr Zaidi Sattar, Chairman of PRI, and Dr Muhammad Abdur Razzaque, Research Director of PRI, also spoke at the event.
Dr Razzaque gave a presentation illustrating the achievements in different sectors and the government spending of the current fiscal year.
This is how RTGS funds transfer works
One of the prime functions of the banking system is to circulate money in the economy and settle payments. These payments can range between clients, foreign settlements, or between banks. Often the high-value, low-volume nature of payments requires higher security and instant process which are typically unavailable with traditional payment methods like NEFT, NPSB, or BACH. And that is where RTGS comes in. Let’s look at what RTGS is and how it works in the Bangladeshi banking system.
What is RTGS?
The term RTGS stands for "Real-Time Gross Settlement". It is a system devised for large-value interbank funds transfer operating in real-time. RTGS is different from the conventional funds transfer channel in the sense that it is instant and irrevocable.
Conventional transfer systems like BEFTN and NPSB use a batch clearance system that bundles several transactions and clears them at a time. These processes are time-consuming, often taking several hours to several days to settle a transaction.
Read More: Which are the Top 10 Strongest Currencies in the World in 2023?
While undertaking high-value transfers, there is always credit risk in the case of batch settlements. For example, a fund transfer failure in the case of BEFTN or NPSB may result in the payable sum being halted for up to 45 days in the gateway. In the case of large-value transactions, such risks may have serious financial consequences.
Why is RTGS better than other funds transfer methods?
There are several reasons why RTGS is a better funds transfer method, even if there are some caveats to it.
Speed
RTGS transfers are settled in real-time and in gross amounts. Well, what does this actually mean? In essence, unlike every batch transaction that happens between banks, RTGS is regulated by the central bank.
The central bank debits funds from Bank A and credits it in Bank B. This happens instantly without the need for the actual movement of money from Bank A to Bank B.
Read More: How to Build a Successful Company?
Security
RTGS transactions use Swift routing through the central bank. The central bank acts as the intermediary and uses a closed channel for transaction settlement. Moreover, the gross settlement amount ensures that there is no chance of transaction failure whatsoever.
High-value transfers
RTGS specializes in high-value and low-volume transactions. It is most commonly used for gross business transactions, government payments, and security settlements. However, being a high-value transfer means there is a very steep minimum transfer amount for each RTGS settlement.
Finality
Even though the central bank acts as the intermediary, the transactions completed through RTGS are final and irrevocable. Once the transaction is completed, it is impossible to reverse the transaction in any way by any party. This provides security against fraud or wire-tagging in transactions.
Read More: Silent Partner vs Investor in Business: Know the Difference, Pros and Cons
How does the RTGS system work?
The RTGS payment system works much like most other transaction systems with a few exceptions. It starts with:
Initial Request
The RTGS payment procedure starts with the sender requesting a transfer of the amount to a certain beneficiary account. The sender is required to input the amount to be transferred and beneficiary account details.
Verification Process
The sender’s bank will then cross-check two things – whether the sender’s account can cover the amount to be sent and also verify the beneficiary’s banking details.
Read More: How to Identify Fake Currency Notes in Bangladesh
Transfer to RTGS
The transaction details are then sent from the sender’s bank to the RTGS system. This closed channel system is controlled by the central bank. Here, the central bank debits the amount from the sender and credits it to the beneficiary’s account.
Settlement
The settlement occurring in the RTGS system is gross. Meaning each individual transfer request is fulfilled individually by the central bank and the associated scheduled banks. This completely removes the credit risk.
Confirmation
The RTGS system confirms the sender and the beneficiary of the transaction and shows the debit and credit information in real-time.
Read More: How to safely send remittance to Bangladesh?
Limitations of the RTGS System
The RTGs system was first introduced in 1985 with just three central banks. Today, over 100 countries and their central banks across the globe use the RTGS system. Even though RTGS is a popular transaction method, it comes with its limitations.
The first limitation is the high minimum transaction limit. In the case of RTGS in Bangladesh, the minimum limit is 1 Lac BDT with a maximum of 5 Lac BDT per transfer. The upper limit is only for personal RTGS transfers. In the case of government payment or interbank foreign currency transfer, there is no upper limit.
There is another issue regarding the liquidity crunch. Every scheduled bank can keep 10% of their scheduled deposit as liquid assets with the Bangladesh Bank treasury and circulate the rest as loans. In the case of high-value high-volume transactions, banks with lower liquidity may not be able to follow through with the debit process.
Read More: Explainer: What it means to let taka float
Even though the sender may completely cover the debit, the liquidity crisis may force banks to default on the RTGS request, resulting in failed transactions. It also has a negative economic signal regarding the liquidity state of the bank.
RTGS in Bangladesh
RTGS was formally inaugurated in Bangladesh on 29 October, 2015. Since then, Bangladesh Bank has connected 60 scheduled banks along with 19 NBFIs into the RTGS system. As of September 2022, Bangladesh Bank has also introduced scheduled transfers for foreign currency interbank with no upper limit.
In 2022, the RTGS system settled 7,977,052 transactions amounting to 5,156,432 crore BDT. There were additional settlements of 5.17 million USD, 15,822,810 EUR, and 204,261 GBP.
Read More: Digital Currency: Benefits and Risks of the Cashless Economy in Bangladesh
A single sender account can request up to 5 RTGS transactions per day, taking the max RTGS limit to 25 lacs BDT per day.
For each transaction, most banks charge 100 BDT as a processing fee. Additional VAT will be included in the transfer amount as per government regulation.
Most RTGS transactions begin at 10 AM and close by 3 PM each banking day. RTGS cannot be utilized on holidays.
Read More: Can You Travel Abroad Without Buying US Dollars?
Final Words
The RTGS system has been a breakthrough in the fund transfer scenario of Bangladesh. While it's not exactly the system for regular day-to-day fund transactions, it provides a secure way for high-value low volume transactions. RTGS essentially brings an added layer of security to the transaction process, barring the credit risk threats and ensuring irreversible gross settlement instantaneously.
BGMEA chief stresses on providing graduates with market-oriented education, skills
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan has underscored the importance of equipping students with knowledge and skills that directly align with the needs of the job market.
It is often observed that individuals who have received traditional classroom knowledge without having link to real-life workplace struggle to effectively apply their learning in practical work environments, he said.
He urged the government and educational institutes to design courses keeping a match with the present and future needs of the job market to meet the growing demand of market-oriented skilled workforce.
Faruque Hassan came up with remarks while addressing the inaugural ceremony of the 'BUFT National Career Fest 2023’ as the guest of honor on May 13.
G-7 talks focus on ways to fortify banks, supply chains as China accuses group of hypocrisy
Bank runs, cyber security and building more reliable supply chains to ensure economic security were among items on the agenda of closed-door financial talks Friday in Japan by the Group of Seven advanced economies.
Tensions with China, and with Russia over its war on Ukraine, loomed large on the wide horizon of issues the G-7 is tackling this year in Japan, its only Asian member.
But while G-7 finance ministers and central bank chiefs discussed ways to protect the international rules-based order and prevent what they are calling “economic coercion” by China, Beijing lashed back, accusing the club of wealthy nations of hypocrisy.
Chinese Foreign Ministry spokesperson Wang Wenbin said Thursday that, “to put it bluntly, the international rules that G-7 talks about are the Western rules of ideology and values and the rule of small clique that puts the U.S. first, that is dominated by G-7.”
“The G-7 demands that China abide by international rules, but it is a representative of those who violate and break international rules,” Wang said in a routine news briefing.
China accuses Washington of hindering its rise as an increasingly affluent, modern nation through trade and investment restrictions that the United States says are needed to protect American economic security.
Speaking before the talks began, U.S. Treasury Secretary Janet Yellen said such measures are “narrowly targeted” and focused on national security.
"It's not focused on undermining China's economic competitiveness or preventing them to advance economically," Yellen said.
Asked what G-7 countries mean by trying to prevent “economic coercion," namely by China, Yellen cited trade actions by Beijing against Australia as one example.
"There have been examples of China using economic coercion on countries that take actions that China's not happy with from the geopolitical perspective," she said. “We in the G-7 share a common concern with this kind of activity and are looking to see what we can try to do to try to counter this kind of behavior.”
China's relations with the 27-nation European Union, which is also a member of the G-7, have also been frayed by friction over trade and over its tacit support for Russia.
Leaders attending the talks in Niigata said they would be considering ways to prevent countries from skirting sanctions against Moscow meant to hinder its ability to continue the war.
Both the U.S. and European Union maintain they are not advocating "decoupling," or dismantling extensive economic ties with China, but support “de-risking” relations to avoid becoming too dependent on China.
For its G-7 presidency, Japan has prioritized launching a partnership with low- and middle-income countries to build “robust supply chains” to help cut carbon emissions. One key area of concern for all G-7 countries is the heavy concentration in China of suppliers of rare earths materials needed in many high-tech products.
Meanwhile, recent failures of banks in the U.S. and Europe have added to the complexity of steering the world economy toward a sustained recovery from the pandemic while cooling inflation that surged to multi-decade highs in the past year.
“It’s become clear that financial worries can spread in an instant via social networking sites, and online banking, allowing money withdrawals outside business hours, can cause bank runs,” Japanese Finance Minister Shunichi Suzuki said Thursday.
The collapses of Silicon Valley Bank and other lenders stemmed largely from the pressure of interest rate hikes that, by making borrowing more expensive, are designed to slow business activity and cool inflation.
The meetings in Niigata are a good chance to “compare notes and to see how we can make the world a little bit more stable and reach the price stability that we very much want to arrive at in short order,” Christine Lagarde, head of the European Central Bank, said in videotaped comments posted online.
Overhanging the financial experts' talks is the question of whether President Joe Biden and Congress will come to an agreement on raising the ceiling on the national debt before the U.S. government runs out of money to pay its bills. Yellen said a default on the national debt would be catastrophic and was “unthinkable.”
A meeting between Biden and lawmakers on the issue was pushed back to May 18 to allow staff talks to continue over the weekend. Administration officials portrayed it as a positive step and it did not appear to indicate a breakdown in talks.
The three days of talks in this port city on the Sea of Japan are the last in a series of ministerial meetings to prepare for a summit of G-7 leaders next week in Hiroshima.
Unilever partners with Orange Corners Bangladesh
To support young entrepreneurs in Bangladesh, Unilever Bangladesh Ltd. (UBL) has signed an agreement with Orange Corners, an initiative of the Ministry of Foreign Affairs of the Netherlands.
Implemented by YY Ventures, BYLC Ventures, and SAJIDA Foundation, and supported by the DBL Group and Unilever, the Orange Corners programme in Bangladesh aims to create opportunities for the next generation of Bangladeshi business leaders by providing them with the necessary tools and resources to succeed, said a press release on Thursday.
With a presence in 17 Hubs across Africa and the Middle East, Orange Corners launched its 18th Hub in Bangladesh - its first Asian nation, in early February 2023. The Orange Corners programme in Bangladesh will equip youth, aged between 18 and 35 years, with skills, funding, and resources to build sustainable businesses, particularly those that address the UN's Sustainable Development Goals; all while the program partners combine their strengths to create an inclusive and equitable entrepreneurship ecosystem in Bangladesh.
The programme has a strong focus on inspiring Bangladeshi youth to participate in solving local challenges, and ensuring gender equity across all phases of the programme.
Unilever has a long-standing commitment to supporting sustainable and inclusive growth. This partnership with Orange Corners Bangladesh aligns with Unilever's global mission to help create a more equitable and sustainable future. By supporting young entrepreneurs in Bangladesh, Unilever hopes to drive economic growth and create a positive impact in the community, reads the release.
Zaved Akhtar, CEO and Managing Director of Unilever Bangladesh said, "Bangladesh's journey over the last few decades has been nothing but short of a miracle, and the economy has immense potential with an enormous pool of young talent. If all young people get the opportunity to acquire the right skills and their personal development, our progress should be unlimited. From raising productivity and reducing inequality to creating businesses and improving communities, there is no end to the benefits their talents and ideas could bring. However, young people today face extraordinary economic, social and cultural challenges and need a wide variety of skills to thrive in work and life. As part of Unilever's Compass priorities and commitment to youth skills development, we have committed to helping 10 million young people aged between 15 and 24 years to gain employment skills that will help them find meaningful work opportunities and prepare for the future of work. Since 2020 Unilever has been working with social enterprises in Bangladesh and helping innovative social businesses to solve market-based solutions which can play vital roles in poverty reduction, economic development and pollution reduction. Our collaboration with Orange Corner will allow us to reach a larger group of youth. I believe our combined strengths will create an inclusive and equitable entrepreneurship ecosystem in Bangladesh."
Orange Corners Bangladesh is gearing up for its first hackathon to be held in May 2023. For additional information on the Orange Corners program in Bangladesh, please contact the team through [email protected].
Products and solution-services exhibition begins in city
A three-day exhibition of products and solution-services of domestic and foreign companies related to infrastructure construction, power generation, renewable energy, safe HVACR and water management started on Thursday at the International Convention Center (ICCB) in the capital's Bashundhara.
Savor International Limited organised this international exhibition under the banner of ‘SAFECON 2023’.
Planning Minister M A Mannan inaugurated the exhibition as the chief guest. Md Habibur Rahman, Secretary of the Power Division of the Ministry of Energy, was present at the programme as a special guest.
A total of 120 companies from 16 countries participated in this exhibition. Visitors from different public and private projects are coming to the exhibition.
The exhibition is open for all the visitors from May 11 to May 13 (10.00 am to 7.00 pm) every day.
Mohammad Hossain, Director General of the Power Cell of the Ministry of Power, Al Mamun Mridha, Secretary General of Bangladesh China Chamber of Commerce and Industry (BCCCI), Engineer Md Hasmatuzzaman, President of the ASHRAE, among others, were also present at the inauguration ceremony.
We accept Uniqlo’s decision with a heavy heart: Yunus Centre
Lamiya Morshed, Executive Director at Yunus Centre, has said it is sad to see a decision to close Grameen-Uniqlo’s outlets in Bangladesh soon after a great success.
"We accept Uniqlo’s decision with a heavy heart," she said in a statement, adding that they have been very happy with this example of the success of a global Social Business undertaken by a popular global company.
Lamiya said they are very sorry that Grameen Uniqlo has decided to close down its business.
It has been a well-known popular global brand marketed globally through Uniqlo's stores, particularly through their unique super stores in mega cities all over the world, Lamiya said.
These products attracted global attention along with the message of Social Business, she said.
The global clothing brand will close all 10 of its stores in the country by 18 June this year, said a press release.
"In view of Bangladesh’s significant economic development in recent years, as well as changes to its business environment, we have determined that our company has fulfilled a certain role and has decided to conclude its business activities," it said.
Raid if sugar is not sold at govt-fixed rate: Tipu Munshi
Commerce Minister Tipu Munshi on Thursday said that the market monitoring team will start raids to ensure that sugar is being sold at prices fixed by Bangladesh Trade and Tariff Commission (BTTC).
The minister also said they would consider importing onions if its price continues to rise.
The commerce minister made the statement in response to reporters' questions after a courtesy call by Helena Konig, deputy secretary general for Economic and Global Affairs of the European Union, at the ministry on Thursday afternoon.
The minister said that due to the increase in the price of sugar in the international market the new price has been fixed.
Traders including Bangladesh Sugar Refiners Association have been informed to sell loose sugar at Tk 120 per kg and packaged sugar at Tk 125 per kg as per the recommendation of the BTTC, Munshi said.
“Instructions will be issued to the concerned authorities including the National Consumer Protection Directorate, and District Administration to see whether they are selling sugar in the market at this price or not,” he added.
The price of onions in the market has increased a lot within a short time. When asked about the government's action in this regard, the minister said that if the price continues to rise like this, initiatives would be taken to import onion from India soon.
“Imports have been cut as domestic onion production is adequate. The market is being monitored. If the price of onion continues to rise, imports will be considered,” the minister said.
Nagad mega campaign: Over 5,000 gift items distributed among winners
Nagad, a leading mobile financial services provider in the country, has so far handed over more than 5,000 gift items, including nearly 100 motorbikes and refrigerators, to the winners under an ongoing mega campaign.
The joy of the winners doubled when they received such exciting gifts from their favourite celebrities, such as Bangladesh National Cricket Team’s ODI captain Tamim Iqbal Khan and television stars – Nusrat Faria, Mishu Sabbir, Ziaul Hoque Polash and Parsa Evana.
Nagad continues to give away gifts to everyday winners under the mega payment campaign that began on 23 March. In continuation of it, the MFS operator distributed gifts among the winners at its head office on 10 May, said a press release on Thursday.
On April 14, on behalf of Nagad, star cricketer Tamim Iqbal reached out to Anup Elvin Adhikari, a renter in Dhaka city, and gave him an exciting sedan car that he won through a Nagad payment.
Expressing his happiness after having received the sedan car, Anup said, “Nagad has changed my life. I won a car through Nagad payment and got to meet Tamim bhai…it is a great feeling for me. Most importantly, we got back our father thanks to Nagad that paid his treatment costs.”
On 17 April, Mobasshera Orny received a refrigerator from actress Nusrat Faria.
Nagad has so far distributed 560 bikes, refrigerators, smart televisions, mobile phones and tabs under the ongoing mega campaign. Besides, 3,300 headphones and smartphones were instantly handed over to the winners at shopping malls. Moreover, 1,673 headphones and smartphones were given to winners through couriers. In all, Nagad has handed out more than 5,000 gifts as of now.
Regarding the current mega campaign, Sadat Adnan Ahmad, chief marketing officer of Nagad said, “Nagad’s mega campaign has appeared as a reason for happiness for our customers.”
“We are getting a huge response from people across the country. Every day winners receive their desired gifts. We want people to get used to digital payments and save their hard-earned money,” he also said.
Under the campaign, customers have opportunities to win various exciting gifts only by buying products worth a minimum of Tk 500 from specific merchants using their Nagad wallets.
Besides, every hour 10 customers are getting a cashback up to 100 percent or maximum Tk 2,000 on Nagad payments from 10 am to 11.59 pm during each campaign day. The cashback amount is sent to their Nagad wallets the next working day.
During the mega campaign that will continue till 30 June, a customer will enjoy cashbacks a maximum of three times, while they will be eligible for the mega offer for once.
Tk5000 crore needed for SMEs to break market monopoly: Kamal Mojumder
State Minister for Ministry of Industries Kamal Ahmed Mojumder on Thursday said the small and medium entrepreneurs are missing from markets due to dirty competition imposed by large companies, which are making hefty profits through monopoly and syndication of daily essential goods.
He sought a fund of at least Tk5000 crore in the upcoming budget to assist the small and medium entrepreneurs through subsidies so that a fair completion remains in the market.
As an example, the state minister said the sugar price would not go much higher if the state-owned sugar industries were not shut down.
The minister said this while speaking as the chief guest at a workshop titled 'Role of media in the development of SME sector in the post-Covid-19 situation' held at the conference hall of the Economic Reporters’ Forum (ERF) in the capital on Thursday.
ERF and SME Foundation jointly organised the workshop. Chairman of SME Foundation Professor Dr. Md Masudur Rahman, ERF President Mohammad Refayet Ullah Mirdha, and General Secretary Abul Kashem also spoke at the function.
The Managing Director of SME Foundation Md. Mofizur Rahman gave a presentation on SME Foundation's activities along with the organisation's future plan.
He highlighted the role of the SME Foundation in creating small and medium entrepreneurship.