bangladesh bank
Special bonds issued to pvt banks to clear liabilities with power plants
In a significant move to stabilize its power sector, the Bangladesh government has secured Tk 2,062 crore through the issuance of special bonds. This initiative, aimed at clearing outstanding liabilities to private power plants, involves a collaboration with two prominent private banks: City Bank and Pubali Bank.
A comprehensive agreement was inked on Wednesday at the Secretariat, marking a critical step in addressing the financial challenges faced by the power sector. As per this agreement, the government will issue bonds worth Tk 1,985 crore to City Bank and Tk 77.50 crore to Pubali Bank, as confirmed by the Ministry of Finance.
Sources reveal that the government’s inability to disburse subsidy funds had left private power plants struggling to meet their financial obligations, leading some to the brink of insolvency.
Read: Bangladesh's imports drop over 18% in first half of FY2023-24
To counter this crisis, the government’s issuance of special bonds comes with an 8 percent coupon rate, mirroring the repo rate set by Bangladesh Bank. Notably, any future fluctuations in the repo rate will correspondingly adjust the bond interest rate.
At the term’s end, the government will settle the bank dues along with interest, subsequently reclaiming these bonds. Unlike typical 15–20 year bonds, these special bonds have a maximum tenure of 10 years, a move tailored to the urgent needs of the power sector.
Key players in the power sector, including Summit Power, United Power, Confidence Power, Baraka, Kushiara, Doreen, and Akron Power, are among the beneficiaries of this initiative. The Finance Division also disclosed plans for phased agreements with other banks, including BRAC Bank and Bank Asia, to further address the sector’s liabilities.
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Reflecting on the agreement’s significance, managing directors of several banks expressed optimism. While banks can leverage these bonds with Bangladesh Bank, it provides the government with crucial financial breathing space.
This strategic financial maneuver stands as a testament to the government’s commitment to ensuring the stability and sustainability of Bangladesh’s power sector.
BB announces new monetary policy to tackle inflation
Bangladesh Bank (BB) on Wednesday announced a contractionary monetary policy statement for the second half of the fiscal year 2023-24 to tame inflation.
“The central bank’s priority is to control inflation at any cost. To do this we set a policy of controlling currency flow outside the bank for another step to curb the growing inflation,” said Abdur Rouf Talukder, governor of the central bank.
Bangladesh has revised down the economic growth projection for FY 2023-24 to 6.5 percent from the initial 7.5 percent considering the ongoing challenges in the financial sector.
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The authorities, however, revised the projection for inflation upwards to 7.5 percent from 6 percent as consumer prices persistently stayed high, according to the monetary policy statement.
The governor said that the central bank wants to bring down inflation to 7.5 percent by June. For this, the policy interest rate has been increased by 25 percentage points to 8 percent in the new monetary policy.
He said that the monetary target is downgraded to curb money supply cutting down private sector credit growth to 10 percent for June from the existing target of 11 percent.
Bangladesh Bank unveils SMART-derived interest rates for January
According to the new policy, the interest rate is being increased from 7.75 percent to 8 percent.
As a result, the interest rate of the money, which other banks will borrow from the BB, will increase.
Besides, the central bank hints to increase the reverse repo rate (now called the Standing Deposit Facility or SDF) minimum interest rate by 75 percentage points from 5.75 percent to 6.50 percent. If there is surplus money in the market, the central bank withdraws the money through reverse repo.
The cap on the special repo or standing lending facility (SLF) interest rate in the policy interest corridor has been reduced by 25 basis points to 9.50 percent from 9.75 percent. This will reduce the cost of borrowing money from the BB during liquidity crises in banks.
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The monetary policy announced for the first half of the current financial year (up to December) targeted private sector credit growth at 10.9 percent. But this target of credit growth like inflation has not been achieved. And till last November, credit growth in the private sector has been achieved at 9.90 percent, which is 1 percent less than the target.
Bangladesh Bank unveils SMART-derived interest rates for January
The consumer loan (retail loan) receivers have to pay the higher 13 percent interest starting from the new year, while other borrowers have to pay almost 12 percent, at 11.89 percent, in interest to the banks.
Bangladesh Bank (BB) announced the interest rates for January in accordance with the 'SMART' method it introduced since july..
The method on which the loan interest rate is now determined is known as 'SMART' or 'Six Month Moving Average Rate of Treasury Bills'. Bangladesh Bank informs this rate at the beginning of every month.
The six-month average interest rate (smart rate) on 182-day treasury bills was 7.10 percent in July this year, 7.14 percent in August 7.20 percent in September, 7.43 percent in October, 7.72 percent in November, and lastly in December smart rate increased to 8.14 percent.
According to the rules of the BB, banks can give loans in January by adding margin or interest at a maximum rate of 3.75 percent with the 'smart' rate of December. On the other hand, non-banking financial institutions can add margin at the rate of 5.75 percent.
Bangladesh's useable forex reserves drop to $15.82 billion: Sources
Bangladesh’s foreign exchange reserves continued to fall with the usable reserves standing now at USD $ 15.82 billion as per IMF guideline, according to banking sources familiar with the development on Tuesday (November 28, 2023).
During the period of the COVID-19 pandemic two years ago, the reserves had soared to $48 billion, thanks to greater inflow of remittances amid reduced import demand. The reserves started decreasing since the eased import restrictions and impact of the Russia-Ukraine war.
Also read: Forex reserves below $20 billion after paying ACU
The latest foreign exchange report of Bangladesh Bank (BB) revealed that the country's reserves on 23 November stood at $19.52 billion based on the IMF formula (Balance of Payments and International Investment Position Manual) or BPM6.
As per the formula, the net reserves will be $3.7 billion less than the total reserve amount, the BB sources said.
The BB spokesperson Mezbaul Haque in this regard told UNB that foreign exchange from reserves is spent and deposited every day.
Also read: IMF relaxes forex reserve and revenue targets for $4.70 billion loan
It is a continuous process of a country, he said advising common people not to panic at the news of decreasing foreign exchange.
In July, Bangladesh started calculating its foreign reserves according to a formula suggested by the International Monetary Fund – BPM6.
Following the new calculation, Bangladesh's gross foreign exchange reserves that time dropped by $26.44bn to $23.56bn.
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Micro, small, medium enterprises in Bangladesh face a financing gap of $2.8 billion
In Bangladesh, the micro, small, and medium enterprises (MSME) sector faces a financing gap of $2.8 billion, according to IFC, a member of the World Bank Group.
With nearly 10 million SMEs contributing to about 25 percent of the country's GDP, enhancing SME financing is key to boosting economic growth, it said on Tuesday (November 28, 2023).
To explore the various aspects of financing for small and medium enterprises (SMEs) in Bangladesh, IFC, in association with Bangladesh Bank and the government of Norway, organized a conference in Dhaka.
Read: BTCCI to promote Bangladesh as 'gateway to South Asia' for Thailand
Experts, policymakers, and stakeholders from across the world shared their insights to help foster a resilient and inclusive environment for SME financing in the country.
The event touched upon the partnership between IFC and Bangladesh Bank, results of an impact assessment study carried out on women-owned SMEs, next-generation SME financing trends, and global best practices in SME financing.
It also addressed the challenges and opportunities in SME financing, identifying solutions and innovations in light of global SME finance developments.
Highlighting the joint efforts of IFC and Bangladesh Bank in SME financing, the conference showcased initiatives, including developing the country’s first Credit Guarantee Scheme (CGS), reforming an SME finance policy, and strengthening the sector’s capacity.
IFC’s impact study on CGS, supported by the Norwegian Embassy, revealed that the number of first-time borrowers receiving loans in cottage, micro, and small enterprises and the average ticket size of the loans for women-owned micro and small enterprises was statistically significantly higher after the launch of CGS than ever before. Women entrepreneurs who received CGS-backed loans reported that it helped their businesses survive amid crises and provided new impetus to thrive.
Speaking at the conference as the chief guest, Governor of Bangladesh Bank, Abdur Rouf Talukder, said that recognizing that cottage, micro, small and medium enterprises (CMSMEs) are the backbone of society, Bangladesh Bank is spearheading several initiatives to mainstream medium and small businesses into the financial landscape.
"This includes establishing a new and dedicated Credit Guarantee Department that has already piloted an online platform—the Credit Guarantee Information Management System—to help lodge applications seamlessly. We are at an important crossroads of economic development and must ensure that everyone, especially those who often get left out, can be part of the financial picture," he said.
Read: BGMEA chief for stepping up economic diplomacy to boost Bangladesh-US trade
Deputy Governor of Bangladesh Bank, Abu Farah Md. Nasser, said a strong SME sector is akin to a superpower for creating jobs, export earnings, and productive proficiency.
"Now more than ever, we need to work together to enhance credit guarantee schemes, tap into alternative databases for SME lending, and ultimately fast-track CMSME finance in Bangladesh. We want to bridge the gap between rich and poor, make sure men and women have equal opportunities, and boost economic growth across the country," he said.
Martin Holtmann, IFC Country Manager for Bangladesh, Bhutan, and Nepal, said Bangladesh is rapidly accelerating its economic development, and creating more and better jobs is a priority they share with the country as long-term partners since 1985.
"IFC’s collaboration with Bangladesh Bank to develop SME solutions highlights a milestone in achieving financial inclusion and economic advancement and underscores the transformative power of partnerships, innovation, and our collective commitment to progress. We aim to increase access to financial products that are affordable, sustainable, and responsive to risks while developing institutional, operational, and policy frameworks to ensure the benefits of economic growth permeate every facet of this dynamic nation,” he said.
Espen Rikter-Svendsen, Ambassador of the Royal Norwegian Embassy in Bangladesh, said, “Lack of access to finance is the biggest impediment to the growth of SMEs in Bangladesh, particularly for the women-headed SMEs."
Recognizing and addressing the challenges faced by SMEs and women entrepreneurs is not just a matter of economic significance but also a step towards fostering gender equality, he said.
"It is essential to create an environment that facilitates easier access to finance for SMEs, encourages more women to take on entrepreneurial roles, and provides them with the necessary financial resources to succeed," said the ambassador.
Other participants included Qamar Saleem, CEO of the SME Finance Forum; Abdoulaye Seck, Country Director of the World Bank for Bangladesh and Bhutan; and managing directors and CEOs of leading banking and non-banking financial institutions in Bangladesh.
The event also included technical sessions and panel discussions focusing on global best practices and a future roadmap to accelerate the SME financing market in Bangladesh.
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BMCCI advocates for business-friendly environment in meeting with deputy governor of central bank
The Board of Directors of the Bangladesh-Malaysia Chamber of Commerce and Industry (BMCCI), led by President Syed Almas Kabir, meet with Deputy Governor Kazi Sayedur Rahman of the Bangladesh Bank to discuss key issues affecting the Bangladesh and Malaysian business community.
The meeting was attended by Senior Vice President Shabbir Ahmed Khan, Secretary General Md. Motaher Hoshan Khan, and Director Mahbubul Alam Shah.
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During the meeting, President Syed Almas Kabir shed light on the challenges faced by general clients in cross-border e-commerce refunding. He also emphasized the importance of streamlining the remittance flow through proper banking channels from Malaysia. For effective management of these issues, BMCCI expressed its interest in partnering with Bangladesh Bank to overcome the challenges.
Senior Vice President Shabbir Ahmed Khan highlighted the significance of promoting bilateral trade with Malaysia and urged for the implementation of appropriate policies to attract foreign direct investment (FDI). Secretary General Md. Motaher Hoshan Khan addressed the trade gap with Malaysia and emphasized the need to address policies that restrict export volumes.
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In response, Deputy Governor Kazi Sayedur Rahman expressed gratitude to the BMCCI delegation for raising these important issues. He requested the chamber to provide pinpointed proposals for review, assuring them that the Bangladesh Bank will handle these matters with utmost importance.
The Deputy Governor also emphasized the importance of attracting remittance by providing services such as mobile applications for ease of money transfers, rather than relying solely on incentives. He urged BMCCI to focus on increasing export volumes and diversifying the exportable product to minimize the trade gap effectively.
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At the end of the meeting, BMCCI delegates echoed their promises to remain committed for fostering a business-friendly environment and enhancing economic cooperation between Bangladesh and Malaysia. The chamber will continue to work closely with Bangladesh Bank to address the challenges faced by businesses and promote bilateral trade growth.
1 USD at Tk 120: Individual traders selling dollars through networks, money changers say they’re empty-handed
Public dependency on the open market for US dollars has increased, where per dollar is being sold at Tk 120-121.
The dollar crisis in the kerb market became more acute after Bangladesh Bank and law enforcers raided money changers with allegations of higher exchange rates.
In this situation, a number of individuals are selling dollars, through their networks, at Tk 120-121 per dollar. They are becoming the lone source of dollars for those who are traveling abroad for treatment, education, and other emergencies, sources said.
Read: Bangladesh Bank introduces dollar booking policy for max 1 year
Jamal (not his real name), owner of a money exchange house in Dhaka’s Motijheel area, told UNB today that they cannot buy a dollar even at Tk 115. “How can we possibly sell per dollar at Tk 113.30?” — he asked.
Many other money changers and individual floating traders of the US dollar remain idle due to the supply crisis of the currency.
In the span of a month, the exchange rate of the US dollar in the kerb (open) market reached Tk 120-121 per dollar from Tk 112. The central bank and law enforcers recently raided money changers and asked to sell per dollar at the previous rate of Tk 113.30.
Read: Selling dollars at higher prices: What is Bangladesh Bank’s action against treasury heads of 10 banks?
Market insiders said there is a severe shortage of US dollars in Bangladesh. The price of foreign currency is increasing uncontrollably and the value of taka is falling. As a result, the price of the dollar in the kerb market has crossed Tk 120.
Talking to various exchange houses and those involved in dollar trading, UNB learnt that most money changers do not have dollars.
Secretary General of the Money Changers Association of Bangladesh, Sheikh Helal Sikder, said that Bangladesh Bank has set the dollar price for money changers. In this case, the buying rate is Tk 111.80 and the selling rate is Tk 113.30.
Read: Dollar goes off kerb market after central bank-led raids of money exchanges
“No one is getting dollars at this price, so the money changers are now sitting empty-handed,” he said.
Replying to a query about the dollar shortage in the kerb market, Bangladesh Bank’s Executive Director and spokesperson, Mesbaul Hoque, told UNB that dollars are being traded, but not everyone is selling them.
Bangladesh Bank sets max interest rate of 10.20% on industrial loans for 6 months
The interest rate on loans from banks in October has been set at 10.20 percent as per Bangladesh Bank’s formula.
The method, based on which the interest rate is now being determined, is known as “SMART” or “Six Months Moving Average Rate of Treasury Bills.” Bangladesh Bank informs of this rate at the beginning of every month.
The new interest rate determining method was introduced on July 1, 2023. Earlier, from April 2020, the maximum interest rate on bank loans was 9 percent.
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Accordingly, in the current month of October, banks can take a maximum of 10.20 percent interest on large-scale industrial loans.
On the other hand, non-banking financial institutions (NBFIs) can charge interest against loans by adding a margin at a maximum rate of 5 percent. Their maximum interest rate will be 12.20 percent and 9.20 percent on deposits. However, the loan interest rate set in October cannot be changed within the next six months.
This will make the highest interest rate on agricultural loans in September 9.14 percent. An additional 1 percent supervision charge can be levied on CMSME, personal, and car purchase loans.
Bangladesh Bank introduces dollar booking policy for max 1 year
Bangladesh Bank publishes the 6-month average interest rate of 182-day treasury bills from January this year. Last January, the smart rate was 6.96 percent. After that, it gradually increased every month and reached 7.13 percent last May. But in June and July, it decreased slightly to 7.10 percent.
However, it increased to 7.14 percent in August and reached 7.20 percent in September.
On the advice of the International Monetary Fund (IMF), Bangladesh Bank introduced a market-based interest rate system.
Despite Bangladesh Bank Governor’s decision to not raise exchange rate before election, dollar rate hiked again
The interest rate cap of 9 percent was imposed from April 2020 to facilitate traders.
A research report by the central bank also recommends withdrawing or increasing the interest rate limit. But Bangladesh Bank was silent as the government did not give positive consent. One of the conditions of IMF’s USD $4.7 billion loan is to make the interest rate market-based. In light of that condition, the new interest rate system was introduced.
Bangladesh Bank introduces dollar booking policy for max 1 year
Bangladesh Bank has introduced a US dollar booking policy for maximum 1 year, at a higher rate, to meet future requirements.
According to the new rules, after one year, the bank will be able to charge a maximum of 5 percent more than the current dollar price with a 'SMART' rate.
The central bank issued a circular in this regard on Sunday.
Despite Bangladesh Bank Governor’s decision to not raise exchange rate before election, dollar rate hiked again
Under the new rules, dollars can be kept with bookings for up to one year. For this, the buyer has to pay extra. It will be determined by the method with which loan interest rate is determined now.
Currently, the dollar price for import is fixed at Tk 110.5. If anyone wants to book a dollar for future, he/she will have to pay Tk 123 per dollar after one year.
Selling dollars at higher prices: What is Bangladesh Bank’s action against treasury heads of 10 banks?
Despite Bangladesh Bank Governor’s decision to not raise exchange rate before election, dollar rate hiked again
Bangladesh Bank decided not to bring major changes in the US dollar exchange rate before the upcoming national election. The central bank’s Governor Abdur Rouf Talukder informed of this decision at a meeting with managing directors and CEOs of banks recently.
At that meeting, the governor said that Bangladesh Bank will not make any policy changes regarding the dollar market or the foreign currency market before the national election.
Despite this decision, the dollar rate has been raised by Tk .50 or 50 paisa in all cases. The price of the dollar has increased to Tk 110 in case of export and expatriates’ income, and to Tk 110.50 in case of import.
Read: Selling dollars at higher prices: What is Bangladesh Bank’s action against treasury heads of 10 banks?The dollar rate was hiked again yesterday, which is effective from today.
The dollar crisis in the country has become evident since March 2023, following the downturn caused by the Russia-Ukraine war.
To deal with this crisis, Bangladesh Bank fixed the dollar price at the beginning. This worsened the crisis. Later, last September, Bangladesh Bank withdrew from determining the price of the dollar.
Read: Bangladesh Bank seeks explanations from 13 banks for selling dollars at higher prices
This responsibility has been given to the Association of Bankers, Bangladesh (ABB) and Bangladesh Foreign Exchange Dealers’ Association (BAFEDA).
Since then the two organizations have been jointly setting the dollar price for export, remittance earnings, and payment of import liabilities.
Read more: Dollar goes off kerb market after central bank-led raids of money exchanges