Bangladesh Bank has marked 10 banks as weak banks. This list has been made by considering the level of classified loans, capital adequacy, loan-deposit ratio and the amount of provisioning or security.
This was stated by Governor Abdur Rauf Talukder in ‘Meet the press’ organized at the Jahangir Alam conference room of the Central Bank on Thursday (August 4). However, he did not mention the names of the banks.
The report of the central bank in Meet the Press said that the master circular regarding debt rescheduling and restructuring has been issued to ensure transparency and accountability regarding the implementation of bank decisions in debt management. According to the conditions mentioned in this circular, the banks will be able to decide on the above matters themselves, which was done earlier in a very opaque and uneven manner.
In order to identify relatively weak banks, four variables such as level of classified loans, capital adequacy, loan-deposit ratio and amount of provisioning have been taken into consideration. Based on this, 10 weak banks have been identified.
Bangladesh Bank is starting discussion process on one-to-one basis with the identified weak banks to solve their problems. In this case, the banks will give a three-year business plan, the progress of which will be monitored by a senior official of Bangladesh Bank.
The governor said, I do not want to name the weak banks. However, the name has already appeared in the newspaper. Our aim is to make banks financially stronger through development.
The remittance inflow sinks to lowest in seven months. The inflow of remittance dropped around 25% in September to $1.54 billion compared to August earnings.
Bangladesh received $2.04 billion in remittances in August, according to central bank data published Sunday (2 October).
The total remittance inflow in the current financial year is $5.67 billion, which was $5.41 billion during the same period last year.
According to experts, the cost of living for expatriates increased due to global inflation. Additionally, they are preferring hundi over legal remittance channels as they are getting Tk5-6 per dollar more than the bank exchange rate.
They had expressed concern that the Hundi channel may become more active.
Remittances dropped to a seven-month low in September as the central bank fixed the dollar exchange rate for inward remittance. Bangladesh received a lower remittance of $1.49 billion last February.
Bankers said the downfall happened after, on the advice of the central bank on 12 September, the banks fixed the dollar exchange rate for remittances at Tk108.
However, bankers had initially feared that remittances may decrease due to fixing the exchange rate. The exchange houses said that the remittances came in less in the first week after the rate was fixed as remitters could not be given higher rates.
A visit to the website of several exchange houses including Moneygram and Western Union shows that they are paying Tk106-107 per dollar for remittance inflow. However, the houses also charge $1-2 as transfer fee.
As a result, those who send remittances in small amounts do not get an average rate of more than Tk104-105 a dollar.
At present remittance through Hundi yields Tk113-114 per dollar. Due to fixed exchange rate at banks, the difference between dollar price of Hundi and the banking channel is at least Tk6-7.
Overall exports declined by 7.52% in September this year compared to the same period in 2021 after 13 months of recovery from COVID pandemic, according to the latest official figures.
But exports of readymade garments reached 10.27 billion dollars in the first quarter of FY2022-23, which is 13.41% higher than previous year’s corresponding time, according to data released by the Export Promotion Bureau (EPB) for July-September.
Knitwear exports, however, declined by 9%, while woven declined by 5.66%, it said.
BGMEA Director Md. Mohiuddin Rubel said on Sunday that BGMEA had already shared early indication of growth slowdown from September onwards, which is apparently reflected in export data for September.
The global retail market is disrupted by many challenges starting from post covid container freight and supply chain crisis, price hike of raw materials, and then anticipated recession in the global economy, which is halting retail sales and demand for clothing, he said.
Rubel said buyers were following cautious steps to make their inventory and supply chain optimum, so some of them are even holding back production and orders.
“Altogether it has been quite a fluid and vulnerable situation, where we have all the strengths and possibilities to grow given our sustainability and competitiveness strides, yet the global economic outlook makes it difficult to foresee something bright for the final quarter of the year 2022,” he added.
Bangladesh Bank has introduced an instalment facility to repay loans from the Export Development Fund (EDF).
From now on, the entire loan liability can be paid in three instalments, which had to be paid at once earlier.
The Foreign Exchange Policy Department (FEPD) of Bangladesh Bank issued a guideline in this regard today (September 15, 2022) and sent it to all authorized dealers engaged in foreign exchange transactions.
According to the Bangladesh Bank directive, exporters can partially repay the EDF loan liability. A maximum of two partial repayments can be made during the loan tenure.
The circular stated that the remaining liability is to be repaid in one go during the loan tenure. That means exporters can pay the entire debt in three instalments.
Sector insiders say that exporters had to face issues with the repayment at once, as export income is not available at the same time.
In such a situation, the exporters will be able to partially pay the EDF liability in instalments only after receiving the export proceeds under the new directive.
The central bank provides foreign currency support to exporters for the import of manufacturing raw materials, under EDF. The tenure of an EDF loan is 180 days. Subject to the approval of Bangladesh Bank, this period can be extended by another 90 days.
The amount of defaulted bank loans in the country increased by about 9.0 per cent to a record Tk 1.25 trillion amid the adverse impact of the Covid-19 pandemic until June this year.
According to the Bangladesh Bank’s June quarter report, banks' loan disbursement stood at Tk 13.98 trillion till June 2022, of which 8.96 per cent or Tk 1.25 trillion turned into bad loans, reports UNB.
Despite the loan moratorium and reducing the number of annual instalments, the volume of defaulted loans has reached a record high in the country so far, said the report.
Three months ago, in the March quarter of 2022, the defaulted loans totalled Tk 1.13 trillion, according to the report.
Accordingly, in the second quarter of the year (April-June), the amount of loans that remained unpaid in time in the banking sector increased by Tk 0.11 trillion.
In the first quarter (January-March) there was an increase of defaulted repayment by Tk 0.10 trillion to Tk 1.13 trillion.
Noted economist, Dr. A B Mirza Azizul Islam said, “If you want to reduce defaulted loans, you have to increase debt collection. At the same time, bulk moratorium and reduced number instalment facility should be stopped for the borrowers.”
He explained why. “Because, having been able to get concessions for several years, the defaulters now think that if I don't repay the loan, I will get more concessions in the future. So, the facility of the defaulters should be stopped.”
Former Bangladesh Bank governor Dr. Salehuddin Ahmed echoed Island.
He said that the loan collection should be focused on the legal procedure as the banks lend money to small depositors. Without legal action, the depositors' benefit would not be secured.
In reply to a query about the capital shortfall of different banks, he said that the more defaulted loans increase, the more security provision should be kept at the central bank.
Banks have run into capital shortages while keeping this extra money out, he said.
The central bank’s latest report found that the capital deficit of seven state-owned banks, including two of the specialized banks, was Tk 0.26 trillion at the end of June.
Out of this, Bangladesh Krishi Bank has the highest deficit of Tk 0.13 trillion. The second highest deficit of Tk 25.07 billion at the Agrani Bank, Tk 22.78 billion in Sonali Bank, Tk 22.61 billion in Rupali Bank, Tk 21.24 billion in Basic Bank, Tk 16.03 billion in Janata Bank, and Tk 21.49 billion in Rajshahi Agricultural Development Bank.
The capital shortfall of five private sector banks is Tk 34.37 billion. Among them, the deficit of the ICB Islamic Bank is Tk 16.59 billion, Tk 12.12 billion at Bangladesh Commerce Bank, Tk 3.0 billion at National Bank, Tk 2.63 billion at Padma Bank, and Tk 230 million at Bengal Commercial Bank.
At the end of June 2022, the total capital deficit of 12 banks stood at Tk 0.29 trillion in the banking system, said the report.
Overall exports declined by 7.52% in September this year compared to the same period in 2021 after 13 months of recovery from COVID pandemic, according to the latest official figures. But exports of readymade garments reached 10.27 billion dollars in the first quarter of FY2022-23, which is 13.41% higher than previous year’s corresponding time, according to data released by the Export Promotion Bureau (EPB) for July-September.
Remittance inflow giving hope to the strained economy. In continuation of the last two months, this month's remittance flow is also surprising. In the first 15 days of this month, expatriate income or remittances have reached 1008.67 million dollars. If the current trend continues, the amount of expatriate income will exceed 200 million dollars at the end of the month. This figure was found in a report of the Statistics Department of the Central Bank.
Bangladesh Bank has introduced an instalment facility to repay loans from the Export Development Fund (EDF). From now on, the entire loan liability can be paid in three instalments, which had to be paid at once earlier. The Foreign Exchange Policy Department (FEPD) of Bangladesh Bank issued a guideline in this regard today (September 15, 2022) and sent it to all authorized dealers engaged in foreign exchange transactions.