The country's business leaders have urged against lifting the cap on interest rate arguing that it will affect investment. They also agreed with the Bangladesh Bank governor who insists that it is not the right time to lift the limit. Speaking at a conference here on Thursday BB Governor Abdur Rouf Talukder said they are waiting for a good time to withdraw the interest cap. Md Jasim Uddin, president of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) opposed any increase in the rate. "If the interest rate suddenly increases, the investors will plunge into trouble. The manufacturing sector investors need to sell their products in a competitive global market, he said on Friday. Read more: BB extends tenure of relaxed ‘risk-weighted’ funding in new investment He told UNB that the interest rate is still high in Bangladesh compared with many other competitive countries, which will have to be taken into consideration before raising the interest rate. Executive president of the Bangladesh Knitwear Manufacturers Association (BKMEA) Mohammad Hatem said entrepreneurs are suffering losses due to the gas crisis. In this situation increasing interest rate will not be investment friendly. He said Bangladesh has to decide whether it wants to bring in investment or not. Higher interest rate will create uncertainty in many sectors, already suffering from the pandemic and the Russia-Ukraine war. The issue of the interest cap came up Thursday in the opening session of a three-day annual development conference organised by the Bangladesh Institute of Development Studies (BIDS) at a city hotel. Read more: BB revises cluster credit guidelines to boost small enterprises Speaking at the event BB governor informed that the central bank has already relaxed the interest rate on consumer loans. Regarding the foreign currency exchange rate, Rouf said the BB will allow the market force to determine it.
Bangladesh Bank (BB) has moved to encourage investment in new businesses including start-ups, private capital, natural resources, real estate and infrastructure, according to an official circular from the regulator. As part of this, the BB on Wednesday extended reduced risk-weighted (interest) or Determining Risk Weighted Asset (RWA) to 100 percent instead of 150 percent till September 30, 2024. Such relaxation has been taken to create the opportunity of funding in reduced cost to grow new businesses and investments, which will make the economy vibrant. Read more: Government working on IMF’s conditions to get $4.5 billion loan The central bank reduced the risk weight on September 29 September 2020 during the adverse impact of the Covid-19 pandemic on the economy. Later, the tenure of relaxed weighted for venture capital and alternative investment sector was extended several times. As a result, the low-cost fund has become available for start-ups, natural resources, and the real estate sector, to create new entrepreneurship opportunities. Read more: Bangladesh’s forex reserves now $34.3 billion, as per IMF formula it’s $26.3 billion
Bangladesh Bank’s deputy governor Abu Farah Md. Nasser has said despite having a credit guarantee scheme of Tk 2000 crore for cottage, micro, small, and medium enterprises (CMSME), loans of only Tk 192 crore has been disbursed so far under the facility, which he said was “disappointing”. He said proper utilization of this credit guarantee scheme is crucial for the revival of CMSMEs. Nasser said this while speaking as the chief guest at a workshop titled “Issues and Opportunities of CMSME Lending”, organized by the Dhaka Chamber of Commerce and Industry (DCCI) on Saturday in the capital. “Though the CMSME sector is called the engine of our economy, and CMSME financing is the fuel of that engine, the financing in this sector is disappointing despite taking different initiatives by the central bank,” he added. Read more: BB revises cluster credit guidelines to boost small enterprises Nasser also said that to reach out to the CMSMEs, banks should think of establishing more sub-branches across the country rather than creating agent banking because creating sub-branches help cut extra administrative costs. “We are going through a tough time due to the Ukraine-Russia war and at this time if we try to control interest rates forcibly, it may create a recession,” he added. The manufacturing and service sector should get priority in getting loans right at this moment to control inflation, considering the global scenario, he said. The Bangladesh bank deputy governor urged the experts to think about developing an online marketplace and blockchain as alternatives to the traditional loan system. Bangladesh Bank has identified a total of 19 clusters, and Nasser urged all the banks to give CMSME loans under these clusters. Later he said that creating a Digital Bank (special focus on CMSMEs) is in the planning of Bangladesh Bank. DCCI President Rizwan Rahman said, “CMSME sector plays an important role in making our economy grow but due to lack of policy support and financial support, we cannot fully utilize this sector. Commercial banks and financial institutions sometimes sense risks in giving loans to CMSMEs.” Read more: Stimulus for CMSMEs: BB asks banks to complete loans disbursement by June Till 2022, 73.77 percent of the stimulus, or Taka 147.46 billion has been disbursed but most of it went to medium enterprises. He also said that regulators should give CMSMEs more access to information and communication technology, and financial assistance so that they can have the ability to boost manufacturing and be competitive in the supply chain process. Md. Jaker Hossain, Director, SME and Special Programmes Department of Bangladesh Bank, presented a keynote paper. Md. Nazeem Satter, General Manager, SME Foundation, in his separate keynote paper highlighted that there are more than 7.8 million CMSMEs across the country. He said only banks are not sufficient to ensure loans for CMSMEs, rather, alternative capacity of MFIs, NGO Foundation, Karmasangsthan Bank, BSCIC, SME Foundation should be utilized to disburse loan among the CMSMEs.
The Ministry of Finance has extended the tenure of banks’ additional investment in the capital market for another year. The Financial Institutions Division of the ministry extended the deadline till December 31, 2023. Last Monday, the Deputy Secretary of the Financial Institutions Division of the Ministry of Finance issued the notification. The notification was sent to Bangladesh Bank yesterday. Read more: Despite central bank's green light, banks shy to invest in capital market Time has been given till December 31, 2023 to bring down the additional investment of banks including BDBL in the share market (collectively or individually in the case of holding shares of other companies) to the prescribed limit as stated in the Bank Companies Act, 1991. Besides, in the case of holding the shares of other companies within that extended period, in the case of holding the shares of any company collectively or individually, the over-investing banks cannot increase the respective investment (in the ratio) based on August 31, 2022 in any order.
Bangladesh Bank has asked banks to provide Tk 107 per US dollar inward remittance. A remitter will now get Tk 107 per dollar, even if they send remittance directly through banks. Currently, remitters are getting Tk 99.5 per dollar through the banking channel. Remittance flow through banks fell drastically in September and October. Read more: Bangladesh Bank will go slow in calculating reserves following IMF formula Apart from this, the banks will not charge any fee for remittance collection from now on. At the same time, in the current reality of foreign exchange reserves, banks have to open LCs with dollar resources from their own sources, Bangladesh Bank said to the commercial banks These instructions were given on Monday (October 31, 2022) in a meeting between the central bank and the Association of Bankers, Bangladesh (ABB), an association of banks' chief executives, and the Bangladesh Foreign Exchange Dealers’ Association (BAFEDA) Deputy Governor Ahmed Jamal and Kazi Sayedur Rahman were present at the meeting. Read more: Bangladesh Bank asks banks to stop ACU transactions with Sri Lanka ABB Chairman and BRAC Bank Managing Director (MD) Salim RF Hossain, on behalf of the banks, BAFEDA Chairman and Sonali Bank MD Afzal Karim, Mutual Trust Bank MD Syed Mahbubur Rahman, City Bank MD Masrur Arefin and others were present. Besides, the central bank has asked to increase the number of exchange houses outside the country to encourage remittance collection directly through banks by reducing the dependence on foreign exchange houses. In this case, the central bank will provide the necessary assistance. Banks have committed to implementing these decisions. Read More: How to safely send remittance to Bangladesh?
Bangladesh Bank (BB) has said that no one can keep foreign currency notes over $10,000 for more than one month. The central bank issued a notification on Wednesday and sent it to all respected banks for displaying the notification to raise awareness. According to it, a resident Bangladeshi can’t keep a cash of not more than $10,000, or foreign currency of equivalent, or in an authorized dealer bank as a resident foreign currency deposit. Read: Illegal dollar trade: BB summons account details of 28 exchanges The circular also states that it is mandatory for resident Bangladeshi citizens to sell the excess amount of $10,000 to an authorized dealer bank/licensed money changer or deposit it as resident foreign currency deposit within one month of arrival in the country from abroad. The BB notification said that possession of foreign currency outside the limit will be an offense, punishable under the Foreign Exchange Regulation Act, 1947. Resident Bangladeshis are requested to sell unauthorized foreign currency to authorized dealer banks/licensed money changers by September 30. Read BB issues clarification to remove confusion over Foreign Currency Accounts
Bangladesh Bank Governor Abdur Rouf Talukder on Saturday said it is not possible to lift the interest rate cap on bank lending (9 percent) in the current situation. He said this while speaking at a program at the Bangladesh Institute of Bank Management (BIBM) held in Mirpur in the capital. Abdur Rouf Talukder said the entire world is now facing a challenge and Bangladesh is no different. In this situation, it is not possible to raise the cap, as many economists have advised to tackle inflation, in line with most central banks around the world that are fighting inflation. During a highly anticipated speech at the annual Jackson Hole conference in Wyoming on Friday, Jerome Powell, the chair of the US Federal Reserve, America's central bank, said they must continue to raise interest rates to stop inflation from becoming "a permanent aspect of the US economy." Read: The first Bangladeshi ship carrying jhut leaves for India "Reducing inflation is likely to require a sustained period of below-trend growth," Powell said at the meeting. Policymakers in Bangladesh however, seem to be banking on the wealth effects of growth to beat out the depreciating effect of inflation. “If it happens (the cap is raised), the private sector will suffer. The overall supply chain will be disrupted. At the moment, there is no decision on lifting the lending cap,” the governor said. “After taking charge as the governor of the central bank, I spoke to the bank chairmen, managing directors, and chief executives. I have wanted to know the problems and possibilities of the country's banking sector from them,” he added. The BB governor hints that there is a dollar crisis and inflation problem, but both would last no longer than 2-3 months.
The small entrepreneurs in the cluster-based manufacturing industries will get 5-year term loans with flexible conditions from the Tk25000 crore special refinance scheme of Bangladesh Bank. The central bank signed a loan deal with 46 banks on Wednesday to implement the scheme to help the cottage and small industries recover from the Covid-19 pandemic shock. The entrepreneurs will borrow from the scheme at 7 per cent interest rate for a 5-year term, while the banks will get funds from the BB at 2 per cent interest for a 3-year term. The BB has specified that that a minimum of 70 per cent of the total disbursed loans should be distributed to the manufacturing and service sector and a maximum of 30 per cent in the business sector. Read: BB revises cluster credit guidelines to boost small enterprises Out of this, a minimum of 75 per cent has been asked to be distributed among cottage, micro, and small entrepreneurs and a maximum of 25 per cent among medium entrepreneurs. The cluster list includes- Agriculture, Food Processing and Agricultural Machinery Manufacturing Industry, Readymade Garment Industry, Knitwear, Design and Decoration, ICT, Leather and Leather Products Industry, Light Engineering, Jute, and Jute Products Industry. Besides, the priority clusters include - plastics and other synthetic industries, tourism, home textiles, renewable energy (solar power), Automobile manufacturing and repairing industries, handlooms, handicrafts, energy-efficient appliances (LED, CFL bulb manufacturing), Electronic appliances construction industry, electronic material development industry, jewellery, Toy Manufacturing, Cosmetics & Toiletries Industry, Agar Industry, Furniture, IT, Computer and Television Service Sector. Under these clusters, women entrepreneurs, entrepreneurs with special needs and entrepreneurs affected by any disaster (such as river erosion, flood, cyclone, flood, drought, monsoon, fire, earthquake, building collapse, epidemic like Covid-19) are covered under this scheme on a priority basis.
Bangladesh Bank (BB) summoned bank account details of 28 money exchange houses in connection with illegal dollar trading and money laundering. The BB officials have inspected 100 exchange houses based on intelligence reports involving illegal foreign exchange transactions out of 235 approved exchange houses. Reviewing different documents, the central bank saw huge cash dollar transactions have occurred by a number of exchange houses. They are also behind in pushing upward the dollar exchange rate in the kerb market by spreading rumors among the people. Md Serajul Islam, executive director and spokesperson of BB told UNB that Bangladesh Financial Intelligent Unit served the summons notices to the exchange houses on behalf of BB. Earlier, the BB served show cause notices to 42 exchange houses for various irregularities in dollar trading. Among them, 5 have already had their license suspended pending investigation. Law enforcers have been asked to take action against 9 establishments for doing dollar trading without a license. Read: BB revises cluster credit guidelines to boost small enterprises Although just 235 exchange houses are licensed by Bangladesh Bank to participate in foreign exchange trade, it is estimated that more than 700 such exchanges are engaged in the dollar trade across the country under different guises. The sector insiders have also said a number of individuals end up trading dollars, and other currencies for that matter, in floating transactions around the capital without permission or approval. But due to the lack of adequate manpower, the central bank cannot monitor the whole dollar and other foreign currencies trading.
Bangladesh Bank (BB) has opened talks with the managing directors and the chief financial officers of 10 banks to try to finalise deals to save them from collapsing. The move got underway after the central bank’s inspection found severe irregularities, huge defaulted loans, liquidity shortage, mismanagement and distortion of funds. The central bank inspectors in their report alerted the authorities about the collapsing banks. BB's new governor Abdur Rouf Talukder has initiated save-the-banks move for the greater interest of domestic economy, sources said adding, a deputy governor has been tasked to complete deals with the banks for 3-5 years. Also read: The dancing dollar and the Bangladesh Bank The discussions are being held in line of the central bank’s policy, said BB officials. After the discussion the BB will sign separate memorandum of understanding (MoU) with these banks. The BB will keep these banks under direct monitoring with an action based plan and giving an interim time to come out from the crisis. The central bank identified the weak banks on the basis of four indicators—level of non-performing loans, capital adequacy, loan-to-deposit ratio, and provisioning. The progress of each bank will be monitored by a senior official of BB as per the agreements’. Also read: BB sets cost ceiling for short-term trade finance in forex Earlier, the BB has signed MoUs with state-owned Sonali, Agrani, Janata, Rupali, BASIC, Specialized Bangladesh Agricultural Bank (BKB), and Rajshahi Agricultural Development Bank (RAKAB). Despite this, the condition of the banks is not improving as expected. In such a situation, new agreements are being made with 10 more banks.