bangladesh bank
EDF alternative: Tk10,000 crore fund to be operated through 49 banks
Bangladesh Bank (BB) on Monday signed a Participation Agreement with 49 banks to ensure adequate liquidity for the export-oriented sector.
Earlier the central bank formed ‘The Export Facilitation Pre-financing Fund (EFPFA)’ of Tk10,000 crore to assist the export sector amid the slowdown of global economic growth. The entrepreneurs can borrow from this fund for an interim period before getting foreign buyers' payment against the order.
From the newly constituted fund of Tk10,000 crore, exporters will be given loans in local currency. After taking loans in taka, they (exporters) can convert them into foreign currency and open an LC. As a result, it will act as an alternative fund to the export development fund (EDF), where exporters get loans in foreign currency, acting as a drag on the country's forex reserves.
It drew attention after the IMF insisted the EDF of USD $7 billion be counted as encumbered reserves - not as part of the country's liquid foreign exchange reserve.
The executive director and spokesperson of BB Mesbaul Haque told UNB that Governor Abdur Rauf Talukdar had a meeting with the MDs of the banks on Monday. Separate deals were signed with 49 banks in the meeting.
Read more: BB set to announce new monetary policy
As per the deal, banks will be able to borrow from this fund at 4 percent interest rate, he said.
After the meeting, Chairman of Association of Bankers, Bangladesh (ABB) and Managing Director of BRAC Bank Salim RF Hossain said that the banks will benefit through the formation of the fund in local currency.
“We applaud this initiative. We have entered into an agreement with the central bank to avail loans from the Export Facilitation Pre-financing Fund,” he said.
After receiving the export work order from the buyer, entrepreneurs will be given loans from this fund to import the required raw materials for the exporting sector. Loans will be given from this fund at a maximum interest of 4 percent.
In respect of this loan, no fee or commission can be collected in excess of the charge or commission fixed by the central bank.
Crisis over LC opening will be normal soon, BB Governor tells DCCI
The leaders of Dhaka Chamber of Commerce and Industry (DCCI) urged Bangladesh Bank (BB) to supply adequate foreign currency in the settlement of LCs for an uninterrupted supply of essential commodities during the month of Ramadan.
The demand came from a meeting with Bangladesh Bank Governor Abdur Rouf Talukder while the newly elected Board of Directors of the DCCI made a courtesy call at his office on Wednesday. DCCI President Md Sameer Sattar led the team when they discussed various issues including the dollar crisis and smooth supply of essentials in the market.
The DCCI leaders told the Governor that public-private partnership is very important to tackle economic challenges.
In addition to this, Bangladesh Bank also needs to aim to assist commercial banks in providing sufficient foreign exchange for the settlement of the LCs to keep the uninterrupted supply of essentials during Ramadan.
The DCCI team also suggested ensuring good governance in controlling Non-Performing Loans by taking necessary reforms in the Banking Act, considering strict actions of loan recovery from the willful defaulters.
Read more: LC margin lowered to ensure stable supply of commodities in Ramadan
Governor Abdur Rauf Talukder said that the economy is currently facing three major challenges- the Russia-Ukraine war, an interest rate hike by the Federal Reserve Bank in the United States and the Covid-19 situation worsening in China.
He said that despite these challenges Bangladesh’s economy has remained quite stable.
He also indicated that the current situation of the LC opening will be normal within the next one or two months.
The central bank is working tirelessly to take several policy steps, including minimising the LC margin to ensure an uninterrupted supply of essentials during the upcoming Ramadan, the Governor said.
DCCI Senior Vice President SM Golam Faruk Alamgir Arman, Vice President Md. Junaed Ibna Ali and other members of the Board of Directors were also present at the meeting.
Read more: Rice, wheat import: Bangladesh Bank asks banks to keep minimum LC margin
IMF DMD arrives in Dhaka today to finalize $4.5 billion loan
The Deputy Managing Director (DMD) of the International Monetary Fund (IMF), Antoinette Monsio Sayeh, arrives in Dhaka today (January 14, 2023) for a 5-day visit.
She will stay in Dhaka till January 18. During her visit, Sayeh will meet with the prime minister, finance minister, governor of Bangladesh Bank and other senior officials of the government.
According to finance ministry sources, Sayeh is coming to Dhaka from Delhi after completing her current Indian visit.
The IMF DMD will visit Padma Bridge on January 18. A meeting with Prime Minister Sheikh Hasina is scheduled for January 16. Sayeh will report to the IMF headquarters regarding the $4.5 billion loan for Bangladesh to combat the global recession.
Read more: Govt works to implement IMF conditions to get $4.5 billion loan: Official
The report will be presented at the IMF board meeting. Based on this, the process of providing the loan will be finalized.
The government has reached an in-principle agreement on the loan with the IMF. Now only the formalities remain.
Some conditions have already been implemented. Electricity prices were hiked by an average of 5 percent on Thursday to implement another IMF condition.
The government will seek some time to implement some other IMF conditions.
Read more: Government working on IMF’s conditions to get $4.5 billion loan
Meanwhile, Bangladesh Bank will announce the new monetary policy for the period from January to June of the current financial year tomorrow in accordance with the conditions of the IMF. It will give the impression of raising the loan interest rate to a limited extent. At the same time, monetary policy will be used to control the rate of inflation.
For this reason, the matter of increasing the policy interest rate of the central bank is also in the process.
The government hopes to receive the first installment of the IMF loan in February. For the first installment, $45.45 crore will be received. Thereafter one installment will be made every six months.
Read More: IMF loan is like a character certificate: PM’s advisor Mashiur
BB set to announce new monetary policy
Bangladesh Bank (BB) is going to announce a new monetary policy on Sunday in line with the advice of the International Monetary Fund (IMF).
Bangladesh requested the IMF for a loan of $4.5 billion last July, and the global lending agency agreed to give it to Bangladesh subject to conditions.
Before lending, the IMF gave several conditions for reforming Bangladesh’s financial sector including setting a monetary policy for every quarter of a fiscal year.
In line with the IMF conditions, the central bank has decided to announce a monetary policy twice in a year, which was announced for a single time during a fiscal year under former Bangladesh Bank Governor Fazle Kabir.
The BB announced the new monetary policy for the remaining period of the current fiscal year, which will be very challenging as inflation and liquidity crisis are mounting, experts say.
Former BB Governor Dr Atiur Rahman told UNB that the economic situation is changing frequently due to variables and volatile geopolitical situations and financial conditions involving Russia-Ukraine war.
Read: Target trade-based capital flight, not genuine consumption through imports: Economists
The central bank’s decision to return to the announcement of the monetary policy twice a fiscal year is a good initiative, he said. However, it should be kept under close watch to readjust the policy instruments as the market conditions are so unstable, he said.
Dr Atiur said curbing demand for goods and services and increasing supply lines are necessary tools for controlling inflation. This is a challenging job given the fast changing external and domestic financial conditions, he said.
The central bank should remain cautious about the multiplier effects of creating more reserve money as the private credit growth and public borrowing level have already reached their targeted limits, he said.
Indeed, containing inflation should remain the top objective of the upcoming monetary policy as the low and middle income groups of people are in troubled water due to this, said Dr Atiur, who also teaches at the Dhaka University.
Former IMF official and economist Dr Ahsan H. Mansur told UNB that the monetary policy cannot bring any impact as the interest rate cap is fixed at maximum 9 percent.
Policy interest rate rising will bring a little change in the economy while lending interest rate is a big tool of monetary policy to control money supply and reducing consumption’s demand.
With the fixed interest rate, the monetary policy cannot make any change in the economy, he said.
Read: Bangladesh Bank raises dollar exchange rate by Tk 1 to Tk 100
Mansur said that the central bank is bringing high power money (HPM) in the market, which will have multiple impacts, and the exchange rate of domestic currency (taka) will also fall then.
[High powered money or powerful money refers to that currency that has been issued by the central bank]
While the exchange rate will fall, inflation would go up and liabilities of external payment would definitely increase, he said.
The new monetary policy will be announced as per the IMF's wishes. As a part of lending, a team of IMF held a series of meetings in Dhaka from October 26 to November 9.
The IMF team led by Rahul Anand (Bangladesh’s mission chief) met with the Bangladesh Bank, the Ministry of Finance, the Energy Division, BBS, the planning ministry, BSEC, NBR, and BERC to know the latest economic situation.
As part of this, the IMF DMD Antoinette Monsio Sayeh is arriving in Dhaka to review the update and finalize the loan deal with Bangladesh.
The BB is announcing monetary policy during her Dhaka visit starting on January 14.
A team led by Bangladesh Bank Governor Abdur Rauf Talukder met with the IMF on the side-lines of the World Bank-IMF annual meeting in Washington last October. After the meeting, the governor told reporters that Bangladesh will get the loan from the IMF.
Rezaul Karim new Bangladesh Bank executive director
The Bangladesh Bank has promoted its Secretary's Department Director SM Rezaul Karim as executive director.
The promotion became effective on January 1, the central bank said in a statement Wednesday.
Rezaul started his Bangladesh Bank career in 1993 as an assistant director. After completing basic training, he was posted at the central bank's Bogura office.
Read more: Bangladesh Bank names Mezbaul Haque as new spokesperson
Later he served the central bank in different capacities – in inspection, foreign exchange policy, human resources, payment system departments and Microcredit Regulatory Authority (Dispatch).
The new Bangladesh Bank executive director is from Bogura and completed his graduation as well as post-graduation in geology from Dhaka University.
Bangladesh Bank raises dollar exchange rate by Tk 1 to Tk 100
Bangladesh Bank (BB) on Wednesday increased exchange rate of a US dollar by Tk 1 to Tk 100.
Now, those who will buy dollars from the central bank will have to pay Tk100 for each US dollar.
Read more: Exporters to get slightly higher rate of Tk 102 for one US dollar
The central bank increased the dollar price within a month. Earlier, the central bank fixed exchange rate of US dollar at Tk 99 on December 5.
It says that the price of the dollar has been increased in line with the market price.
Central bank spokesperson Masbaul Haque told UNB that the dollar price has been increased to match the market price and it is part of regular initiative.
Read more: Remittance: Bangladesh Bank tells banks to provide Tk 107 per dollar
Bangladesh gets $10.49 billion inward remittances in July-December: Central Bank
Bangladesh received USD $1.70 billion inward remittance in December 2022 through the banking channel, up by 4.23 percent compared to the same month of the previous year.
In November, the expatriates sent home $1.59 billion through the legal channel, according to Bangladesh Bank an updated report released on Sunday.
The central bank has been trying to increase inward remittance flow through banking channels by offering incentives and higher exchange rates of the US dollar.
Read: BB moves to encourage greater flow of remittance to boost forex
A review of the remittance flow showed that the total remittance received in the first 6 months of the fiscal year 2022-23 (July- December) was $ 10.49 billion.
In the same period of the previous financial year, the expatriates sent $10.24 billion in remittances. Accordingly, in the first 6 months of this fiscal year, Bangladesh received $287 million more in remittances.
The BB spokesperson Mesbaul Haque told UNB that in order to increase remittance inflow, the central bank has increased the exchange rate of US dollar.
Read: Bangladesh received $357.76mn remittance in first week of Oct
In addition to a 2.5 percent hassle-free incentive for remittance, several banks also provide additional incentives to attract foreign exchange, he said.
Banks will not cut any charge or fee for sending remittances in the legal channel, he said.
Research by Bangladesh Bank found that more than 40 percent of remittance of expatriate income is sent in the country through hundi or unofficial channel.
Read More: Banks to stop charging any fees for handling remittances
Scam-hit Islami Bank earns operational profit in 2022, Basic Bank reports loss
Despite criticism of mismanagement and loan scams, the Islami Bank Bangladesh Limited (IBBL) has secured a top position in making operational profit in 2022, according to a Bangladesh Bank report.
The IBBL has now the highest deposit holding in the country. The depositors rushed to withdraw their money from the bank amid reports of loan scams in last November and December.
Banks have prepared financial reports based on their branch office information on disbursed loans and their collection update. The BB report released late Saturday found that the operating profit of most of the banks increased in 2022, compared to the same period of the previous (2021) year.
Also Read: Deposits at IBBL 'completely safe': Bangladesh Bank
According to the report, IBBL is at the top among the banks in gaining operational profit. In 2022 (January-December), the bank made an operating profit of Tk 2,646 crore.
In the previous year in 2021, the profit of the bank (IBBL) was Tk 2430 crore. In 2020, it was Tk 2350 crore.
Among other banks, in 2022, the state-owned Sonali Bank made an operating profit of Tk 2,520 crore. In 2021, it was Tk 2100 crore.
Also Read: IBBL reaches Tk 1.40 trillion deposits, 1.16 trillion investments: IBBL MD
But operating profit is not the actual profit of the bank. Net profit will be calculated after saving provision or safety stock at fixed rate against debt from operating profit and payment of corporate tax. Net profit is the actual profit of the bank.
State-owned BASIC Bank could not make operating profit in 2022. On the contrary, they incurred a loss of Tk 371 crore; Last year also the loss was Tk 80 crore. Apart from this, Citizen Bank has made an operating profit of Tk 2.54 crore in six months. The bank started operations in mid of 2022.
Economist and former adviser of caretaker government Dr. ABM Mirza Azizul Islam told UNB, "Bangladesh Bank is giving special benefits to the defaulters and showing the interest of such loan to the income sector. In this case, the financial report of the bank is being shown well on paper.”
Read More: BB disburses Tk 4000 crore as liquidity support to 5 Islami banks
He also said, "Political commitment and goodwill are needed to restore order in banks."
According to the data of the Central Bank, in the quarter of September 2022, the defaulted loan amount in the banking sector of the country has increased to more than Tk1.34 crore, which is 9.36 percent of the total loan.
NBFIs cannot change any vehicle before 8-year use: Bangladesh Bank
Bangladesh Bank has instructed the non-banking financial institutions (NBFIs) that the institutions cannot change any of their vehicles before eight years.
Earlier, as per a 2015 directive, there was an opportunity to change vehicles after every five years.
Read: Loans won’t be considered ‘at risk of default’ if 50% instalment paid by Dec: Bangladesh Bank
In line with the government's decision to reduce operational and development expenditure in the context of the global economic situation, purchases of any type of vehicles (new and replacement) at the official expenses by NBFIs will be suspended during the fiscal year 2022-23.
The Financial Institutions and Market Department of Bangladesh Bank on Wednesday (December 21, 2022) issued a circular in this regard.
The chief executives of financial institutions cannot be given multiple vehicles at companies’ expenses. Apart from this, BB has instructed that the officers who take car loans and maintenance cost cannot use the companies’ vehicles.
Read More: BB relaxes loan repayment for NBFIs
BB relaxes loan repayment for NBFIs
Bangladesh Bank (BB) on Wednesday (December 21, 2022) relaxed term loan repayment policy for non-bank financial institutions (NBFIs) after relaxing such policy for banks’ borrowers.
The borrowers would not be declared as defaulters if at least 50 percent of the installments are paid as of September, according to a notice of the central bank.
The rest of the installments could be repaid on a monthly or quarterly basis within one year after the current repayment schedule of the loan.
Read more: BB relaxes ICRRS to facilitate businesses’ loan
The loan repayment relaxing policy would also be applied for the funding in investment of shariah-based financial institutions. If borrowers fail to repay the loans, lease and investments within the new repayment schedule, they would be classified as per rules, the BB notification said.
The circular stated that the NBFIs are facing difficulties in realising installments on time as the cash flow to SMEs and large enterprises has been affected by the Russia-Ukraine war and global recession.
Read more: BB extends tenure of relaxed ‘risk-weighted’ funding in new investment