Awami govt set to destroy backbone of Bangladesh economy

[idune]

No new investment made in knitwear sector in 3 years

Shamsul Huda

No fresh investment has been made in the knitwear sector in the last three years though there are opportunities to expand its export market share.

Leaders of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) said despite the rising demand for Bangladeshi global brand products, the sector failed to attract new investments.

"We do not have the capacity to meet the growing demand for knitwear garments in the export market but still new investments are not being made", a BKMEA leader said.

He said energy and power crisis, labour unrest and the new wage structure are behind hindrance to fresh investments.

According to BKMEA data, over the last three years fewer than 30 new small-scale factories were established in manufacturing knitwear fabrics.

The data says in the year 2011 there were more than 1,500 factories but now only 800 factories are regular members of the BKMEA.

The data also reveals that the sector has not only failed to attract new investments but also many existing owners are shutting down their factories.

BKMEA vice president Mohiuddin Faruqui said due to the new wage board structure and shortage of gas and power many factory owners are closing their business.

He said if the problems of unrest and utility services are removed, fresh investments would be made again.

Mr Faruqui said failure in attracting fresh investments and shutting down of the existing factories may create unemployment problem in the upcoming days.

Mohammad Hatem, first vice president of the association, said there are still immense opportunities for local global quality ready-made knitwear in the international market.

He said though if the government establishes a planned industrial estate, fresh investments would start coming.

Mr Hatem said after declaration of the new wage board many factory owners have shut down their units after paying all the dues to the workers.

He said a number of owners have also closed their factories as they failed to pay the increased salaries and arrears.

He said the problem could be solved by setting up factories with all the compliance facilities.

Another leader of the association said disastrous incidents over the last couple of years and the buyers' strictness of maintaining compliance have changed trend of investing money in the knitwear sector.

He said new investments would certainly come to the sector if the government helps set up an industrial park where all the compliances would be maintained.

Speaking on the issue an entrepreneur said, "I had a plan to invest in the knitwear sector but accidents and unavailability of power and gas are the main problems at this moment."

"If these problems are solved, then I will try again to invest some money in the sector", he said.

No new investment made in knitwear sector in 3 years | LAST PAGE | Financial Express :: Financial Newspaper of Bangladesh

 

[idune]

China had provided duty free access to nearly 5000 Bangladeshi products including ready made woven and knitware garments in 2012. But india backed Awami League regime did not even respond to Chinese offer and avail the tremendous opportunity for Bangladesh economy. With such facility Bangladesh could easily expand export more than billion and hundreds of thousands could get job. One may ask question why Awami League did not convert on unilateral Chinese offer? Answer is stunningly obvious - breaking down Bangladesh economy is india backed Awami League agenda.

Same way india backed Awami League stalled deep sea port project obliging indian instruction.

চীনে বাণিজ্য সুবিধার প্রস্তাব: দুই বছরেও সিদ্ধান্তহীন বাংলাদেশ

08 May, 2014
চীনের বাজারে বাংলাদেশের বাণিজ্য সুবিধা নিয়ে দেশটির সরকার দুবছর ধরে অনুরোধ করে এলেও কোনো সিদ্ধান্তই জানাতে পারেনি বাংলাদেশ। প্রধানমন্ত্রী শেখ হাসিনার সম্ভাব্য আসন্ন চীন সফর কেন্দ্র করে এ বিষয়ে সিদ্ধান্ত নিতে আজ জরুরি বৈঠকে বসছে বাণিজ্য মন্ত্রণালয়।
বর্তমানে ‘জিরো-ট্যারিফ স্কিম’-এর আওতায় বাংলাদেশকে ৪৭৮৮টি পণ্যে শুল্কমুক্ত ও কোটামুক্ত রফতানি সুবিধা দিয়েছে চীন। তবে বেইজিং এই স্কিমটি আপটা প্রেফারেন্সিয়াল ট্যারিফ ট্রিটমেন্টের সঙ্গে সমন্বয় করতে আগ্রহী। এ বিষয়ে ঢাকার সিদ্ধান্ত জানতে ২০১২ সালে প্রথম প্রস্তাব দেয়ার পর একাধিকবার চিঠি দিলেও কোনো সিদ্ধান্ত জানতে পারেনি বেইজিং।

বিডিটুডে.নেট:চীনে বাণিজ্য সুবিধার প্রস্তাব: দুই বছরেও সিদ্ধান্তহীন বাংলাদেশ

 

[idune]

Heavy govt. borrowing distorts competition in banking

Following the budget disclosure that the government borrowing from banks in the FY 2014-15 would stand over Tk 31,000 crore, yet another circular of Bangladesh Bank last week has come as a matter of big concerns to the banking.
It said the central bank’s ceiling on lending to single exposure borrower at 35 per cent of its paid up capital will not be valid to borrow for funding Padma Bridge project. What it does literally means is that the government may now force banks to advance loans for the construction of the Padma Bridge up to any amount.

It may thus appear as a big threat to many banks which may eventually find them in liquidity crisis to carry out normal banking transaction of offering loans to the private sector.

The problem arose because of the pullout of World Bank, ADB, IDB and JICA from funding the bridge at a cost of $2.9 billion on alleged corruption charges at high government level cantering the award of major contracts to questionable parties.

Undertakes big burden
But since it is a politically sensitive project for the government to facilitate easy access for South-western Bangladeshis into Dhaka, it has decided to build the bridge with its own resources this time. But the usual practice for building such mega projects through long term funds from multilateral agencies which carry a service charge below 1 percent with a 10 years grace before starting repayment.

But the government is moving ahead to fund the project from budgetary resources and with bank loans outside the budget. The Bangladesh Bank circular appears to open the way of massive borrowing from banks to fund the project.
The government has already awarded the contract to a Chinese firm. Meanwhile, Prime Minister Sheikh Hasina during her visit to China last week tried to secure soft Chinese loans for the project. But it didn’t seem to work forcing the government to depend on commercial bank loans.

The budget for 2014-15 has allocated over Tk 8,000 crore for the bridge project. It is part of a huge deficit budget. Banks may be forced to provide commercial loans to the Bridge projects which may ultimately cost over Tk 30,000 crore, informal estimates suggest.

Meanwhile, the interest on bank loans will eat up the major part of budgetary resources for domestic debt servicing in future which stands at 18.5 percent in the upcoming fiscal and as the practice goes, the government will borrow more and more every year from banks to repay their earlier loans. Reports say the government has already emerged as the single biggest borrower from the country’s banking system and may very soon outweigh the private sector’s access to bank credit.
The impact is already felt in the banking sector. Many banks have already become the major lenders to the government investing funds in bonds which are risk free and beyond the fear of ending in defaults. But they carry lower interest between 9 and 10 percent. They are seemingly scared to provide loans to the private individuals and business firms, which are often forced upon them through political pressure making them risky.

Private investment risky
Most borrowers in recent time use fictitious names and collaterals like the Hallmark Group or like the unfolding scandals at BASIC Bank. Moreover the country’s political instability has made investors shy while banks prefer to invest in government bonds for safety.

In the process, the government is using the banking sector as the second revenue source, albeit as commercial loans next to the NBR for funding budgetary deficit. Most banks now mobilize fund for government borrowing overlooking the private sector’s trade and investment. However, demand for private investment is also shrinking.

Meanwhile, commercial banks are charging higher rates from private borrowers from 18 percent, up to 22 percent for consumers’ loans. Thus the demand by businesses to bring interest rates down to a single digit is becoming practically impossible, as banks are making up their losses from lending to the government at lower rates by charging high rates from the private sector. This is also discouraging productive investment.

Sources said the claim often made that the banking sector is sitting on excess liquidity is a fiction. According to some sources banks are in fact sitting on government bonds, not on excess liquidity and they are awaiting retirement of their earlier loans and small interest on them along with mobilizing new deposits.

Sources claim that bank’s excess liquidity now stands at around Tk 135,000 crore. But at least Tk 110,000 is lying in terms of bonds and in the absence of a secondary bond market, banks are not being able to monetize them for further lending. Thus the banking sector is increasingly losing its competitiveness as funding institutions to private sector for investment while the government is extending its control on them. There is no competition among banks now to catch big borrowers or investment projects; servicing the government credit requirement is all that matters to them.

The awaiting disaster
Another danger is seemingly approaching. When banks are offering lower interest to depositors in absence of huge investment demands and as the government is borrowing at lower rates, it is now offering higher rates to investors in national saving certificates and other instruments.

As a result, most people are taking away savings from their banks to reinvest in saving instruments and this in turn is going to create a severe liquidity crisis in banks in near future pushing them to face yet another crisis.
It appears that the banking sector is losing its character as deposit holders of public funds and its lending it to private business. They are emerging as lender to the government. In this situation as the slow down in investment persist, new business and industrial expansion is also slowing down and this in turn is slowing down new job creation and income generation to bring down the GDP growth at the end.

The government’s bigger presence in banking sector is not allowing the development of a healthy and competitive banking sector to support expansionary business activities in the economy. It may have a disastrous affects on the economy at the end.

Holiday

 

[idune]

Remittance inflow drops after 14 yrs

July 4, 2014 12:17 am·

Staff Correspondent

The country’s remittance inflow registered a negative growth in financial year 2013-14 for the first time in last 14 years against the backdrop of downward manpower exports during the period, said economists and Bangladesh Bank officials.
According to BB data released on Thursday, remittance inflow decreased by 1.61 per cent in the FY14 compared with that of a rise of 12.59 per cent in FY13.

The expatriate Bangladeshis sent US$ 14.22 billion in the FY14 against US$ 14.46 billion in the FY13. The inflow of remittance was US$ 12.84 billion in the FY12.The BB data showed that the inflow of remittance had maintained an increased trend between the FY01 and the FY13.The BB data, however, revealed that the remittance inflow increased by 21.55 per cent to US$ 1.28 billion in June, 2014 from US$ 1.05 billion during the same month in FY2013.

- See more at: Remittance inflow drops after 14 yrs

 

[Zabaniyah]

Tk 134 crore vanishes

Sajjadur Rahman

Account holder accuses Premier Bank's vice-chairman of stealing the money; now an AL lawmaker, he rejects the claim; ACC finds evidence of Tk 62cr fraud

The Anti-Corruption Commission has found evidence of embezzlement of Tk 62 crore from the account of a client of Premier Bank's Bangshal branch, say officials.

The client, Khalilur Rahman, has claimed that bank's then vice chairman BH Haroon, also an Awami League lawmaker from Jhalakathi, stole Tk 134 crore from his account in 2008 in collusion with some bank officials.
“We have run an enquiry and found that around Tk 62 crore was embezzled through cheque fraud. Bank officials were involved in the scam,” ACC Chairman M Bodiuzzaman told The Daily Star.

The ACC has initiated the process of filing a lawsuit, he said.

Khalilur and Haroon are from the same area in Jhalakathi, and they know each other for 25 years.
Khalilur, also joint secretary general of Jatiya Party (Manju), said he had partnership in construction business with Haroon and his brother Mojibul Haque Kamal for 12 years. But they didn't have any written agreements.

Documents show that construction firm Rumi Enterprise, owned by Khalilur, got a Tk 203 crore work order for building 15,000 houses in Sidr affected areas in southern Bangladesh in June 2008. The project was funded by the Saudi government.
In July, Khalilur opened an account with Bangshal branch of Premier Bank to make transactions for the project. He received Tk 203.06 crore from the Saudi government through seven cheques.

Khalilur withdrew Tk 69.11 crore from the account, and kept the remaining Tk 133.95 crore deposited in his account.
He had no idea that terrible news would come his way.

When he asked bank's then Bangshal branch manager Shamsuddin Chowdhury in December to adjust his Tk 4.5 crore loans at the bank's Gulshan branch, Shamsuddin told him that his account had been closed and no money was there.

“The news came as a big shock to me. It was like a bolt out of the blue,” Khalilur told this correspondent.
The manager informed Khalilur that he had withdrawn all the money through 388 cheques before asking for closure of the account.

Khalilur later found out that the bank's then vice chairman Haroon, additional managing director Abu Hanif Khan and Shamsuddin along with several others faked his signature and withdrew the money between October and November 2008.
He then took the issue to the bank's top management that held a series of meetings with the parties involved. But those meetings failed to yield any result.

Khalilur then approached Bangladesh Bank, the finance ministry and the ACC.

The BB finally launched an investigation into Khalilur's allegations last year. It found that the Premier Bank disbursed the money though the signature of the account holder and those on the cheques didn't match.

“Bank officials were least bothered about the dissimilarity in signatures. They allowed the perpetrators to take the money, which was unacceptable,” said a member of the probe team, asking not to be named.

Asked, Abu Hena Md Razi Hassan, deputy governor of the central bank, said they found some “elements of corruption” in this case, and referred it to the ACC for further investigation.

The ACC chairman said, “We are sure that bank officials were involved in the scam. But we cannot be sure about BH Haroon's involvement.”

Asked about the mismatch in signatures, then Bangshal branch manager Shamsuddin said there could have been a “bit difference in signatures” on the cheques used to withdraw the money.

“The account holder took the money himself and closed his account,” claimed Shamsuddin, who is now with the bank's Motijheel branch.

When told that there must be video footage of who took the money from the bank's Bangshal branch, he said, “Yes, there should be …”

Abu Hanif Khan, additional managing director of Premier Bank, said the bank's probe had found dissimilarity in signatures on some cheques.

“We have sent our findings to the central bank and the ACC,” he said.
Hanif ruled out his involvement in the scam.

Asked whether the bank checked the video footage to know who withdrew the money, Hanif said he had no knowledge about it.
AL lawmaker Haroon rejected Khalilur's allegations against him, and claimed that Khalilur took loans from Premier Bank's Gulshan branch. As Khalilur failed to repay the loans, the bank declared him a defaulter.

“The bank now thinks of waiving his loans, considering his problems,” said Haroon, now a director of the bank.
Khalilur claimed that Haroon stole his money and amassed huge wealth under his and family members' names. He said it was evident from the lawmaker's wealth statements.

According to documents, Haroon invested Tk 6.62 lakh in capital markets and savings certificates in 2008. He used to earn Tk 30 lakh annually from rents and businesses, while his wife had no income.

Now, he and his wife have investments of more than Tk 15 crore in capital markets. He has about Tk 3 crore in cash, Tk 3.68 crore in fixed deposit and plots of land in Gazipur, Mirpur, Banani and Baridhara.

Tk 134 crore vanishes | Account holder accuses Premier Bank's vice-chairman of stealing the money; now an AL lawmaker, he rejects the claim; ACC finds evidence of Tk 62cr fraud

Great, now account holders aren't even safe from Awamis

By the way, Premier Bank is a terrible PCB. A lot of doladoli goes on there. Even worse than state-owned banks. Add BCB to the list.

 

[idune]

For those jumping on farcical /cooked up GDP figure, here is the real inside story of Bangladesh economy and how Awami League destruction pushed investment to stand still.

Naya Diganta :: দুই মাসে সাড়ে চার হাজার কোটি টাকার সঞ্চয়পত্র বিক্রি

 

[idune]

Most banks face relationship cut by foreign counterparts
Credibility gap in correspondent banking
FE Report


Some 60 per cent banks operating in Bangladesh faced termination of ties with their foreign corresponding banks in transactions during the last three years, basically for a credibility gap, a research reveals.

According to the findings on the state of trans-border banking, the state-owned banks (SoBs) are facing such a situation "very badly".

The research, carried out by Bangladesh Institute of Bank Management, listed the reasons for such a deplorable situation in correspondent banking. Non-performing loan (NPL), capital shortfall, dilatory-payment tendency, and adverse media reports are among the causes.

The findings were revealed during a research workshop on 'Challenges of Correspondent Banking Relationship for Banks of Bangladesh' in the city Wednesday.

A questionnaire survey carried out on 19 private commercial banks (PCBs), three state-owned commercial banks (SCBs) and two foreign commercial banks working in the country portrayed the situation in correspondent banking.

"The survey observations reveal lack of business and profitability as well as compliance issues as the key reasons for the growing termination of correspondent banking relationship in the country," said Dr. Shah Md. Ahsan Habib, Professor and Director of BIBM who presented the research paper at the workshop.

Apart from Mr. Habib, the research team also comprised Assistant Professor of BIBM Antara Zareen, BIBM Lecturer Tofayel Ahmed, Joint Directors of Bangladesh Bank Kamal Hossain and Pradip Paul and Vice-President of Mutual Trust Bank Limited A T M Nesarul Hoque.

Correspondent banking is a major concept in global finance which works through an agreement between a foreign and a domestic bank where a correspondent account, usually referred to as a vostro account or nostro account, is established at one bank for another.

Currently in Bangladesh, banks are mainly engaged in traditional correspondent banking like trade payment, fund transfer, remittance services, collecting documents and payment under documentary collection, money-service business, LC advising, reimbursement, nomination under LC, LC conformation, credit reporting and bill discounting.

Focusing on the reasons for decline in the correspondent banking, Habib said: "In several instances, there are complaints from internationally reputed banks that they are not interested anymore with the account relationship as transactions are extremely limited."

In addition, he added, almost half of the respondents also mentioned overall risk, concerns about money laundering and terrorist-financing risks and changes to legal regulatory requirements in foreign jurisdictions as causes of decline.

"The declining trend in correspondent banking is not a good indication for the banking sector in the country as it would affect our trade abroad while increasing the cost of doing business in the country," Mohammad Naushad Ali Chowdhury, Executive Director of Bangladesh Bank, told the meet.

"There are some regulatory issues involved in this declining trend as pointed out in the research which the central bank needs to address," he added.

Noting that Bangladesh's global trade is still too much concentrated within the United States and the European Union, Mr. Chowdhury in his speech also called for diversifying the export destinations through increased trade with the emerging economies.

The BIBM research, which is still in its draft stage, reveals that most of the banks that terminated nostro accounts or correspondent banking relationships in the country are from the United States and Europe.

The study carries a note of caution that due to termination in correspondence, banks in the country are facing challenge to access different business products and services -- the maximum of it coming from trade finance.

Decline in correspondent-banking relationship is also resulting in growing loss of competitiveness in international banking for the local banks, according the study findings, as business communities try to avoid nominating such banks in trade transactions.

"Replacement is becoming a major challenge for the country's banks due to such correspondence termination as responses and replacements are becoming costly," the researchers said in their observation, adding that huge documentation and transaction time are increasing the operational cost of maintaining replacement account.

High country risks as well as lack of credit rating by a world-class rating agency of local banks are also weakening the bargaining power of local banks in maintaining foreign-correspondent relationship.

Afterwards, participants in the workshop also discussed the possible measures for reversing the downturn in correspondent banking in the country. Based on the feedbacks coming from them, the draft research paper will be finalized, BIBM officials informed.

http://www.thefinancialexpress-bd.c...face-relationship-cut-by-foreign-counterparts

 

[BDforever]

Most banks face relationship cut by foreign counterparts
Credibility gap in correspondent banking
FE Report


Some 60 per cent banks operating in Bangladesh faced termination of ties with their foreign corresponding banks in transactions during the last three years, basically for a credibility gap, a research reveals.

According to the findings on the state of trans-border banking, the state-owned banks (SoBs) are facing such a situation "very badly".

The research, carried out by Bangladesh Institute of Bank Management, listed the reasons for such a deplorable situation in correspondent banking. Non-performing loan (NPL), capital shortfall, dilatory-payment tendency, and adverse media reports are among the causes.

The findings were revealed during a research workshop on 'Challenges of Correspondent Banking Relationship for Banks of Bangladesh' in the city Wednesday.

A questionnaire survey carried out on 19 private commercial banks (PCBs), three state-owned commercial banks (SCBs) and two foreign commercial banks working in the country portrayed the situation in correspondent banking.

"The survey observations reveal lack of business and profitability as well as compliance issues as the key reasons for the growing termination of correspondent banking relationship in the country," said Dr. Shah Md. Ahsan Habib, Professor and Director of BIBM who presented the research paper at the workshop.

Apart from Mr. Habib, the research team also comprised Assistant Professor of BIBM Antara Zareen, BIBM Lecturer Tofayel Ahmed, Joint Directors of Bangladesh Bank Kamal Hossain and Pradip Paul and Vice-President of Mutual Trust Bank Limited A T M Nesarul Hoque.

Correspondent banking is a major concept in global finance which works through an agreement between a foreign and a domestic bank where a correspondent account, usually referred to as a vostro account or nostro account, is established at one bank for another.

Currently in Bangladesh, banks are mainly engaged in traditional correspondent banking like trade payment, fund transfer, remittance services, collecting documents and payment under documentary collection, money-service business, LC advising, reimbursement, nomination under LC, LC conformation, credit reporting and bill discounting.

Focusing on the reasons for decline in the correspondent banking, Habib said: "In several instances, there are complaints from internationally reputed banks that they are not interested anymore with the account relationship as transactions are extremely limited."

In addition, he added, almost half of the respondents also mentioned overall risk, concerns about money laundering and terrorist-financing risks and changes to legal regulatory requirements in foreign jurisdictions as causes of decline.

"The declining trend in correspondent banking is not a good indication for the banking sector in the country as it would affect our trade abroad while increasing the cost of doing business in the country," Mohammad Naushad Ali Chowdhury, Executive Director of Bangladesh Bank, told the meet.

"There are some regulatory issues involved in this declining trend as pointed out in the research which the central bank needs to address," he added.

Noting that Bangladesh's global trade is still too much concentrated within the United States and the European Union, Mr. Chowdhury in his speech also called for diversifying the export destinations through increased trade with the emerging economies.

The BIBM research, which is still in its draft stage, reveals that most of the banks that terminated nostro accounts or correspondent banking relationships in the country are from the United States and Europe.

The study carries a note of caution that due to termination in correspondence, banks in the country are facing challenge to access different business products and services -- the maximum of it coming from trade finance.

Decline in correspondent-banking relationship is also resulting in growing loss of competitiveness in international banking for the local banks, according the study findings, as business communities try to avoid nominating such banks in trade transactions.

"Replacement is becoming a major challenge for the country's banks due to such correspondence termination as responses and replacements are becoming costly," the researchers said in their observation, adding that huge documentation and transaction time are increasing the operational cost of maintaining replacement account.

High country risks as well as lack of credit rating by a world-class rating agency of local banks are also weakening the bargaining power of local banks in maintaining foreign-correspondent relationship.

Afterwards, participants in the workshop also discussed the possible measures for reversing the downturn in correspondent banking in the country. Based on the feedbacks coming from them, the draft research paper will be finalized, BIBM officials informed.

http://www.thefinancialexpress-bd.c...face-relationship-cut-by-foreign-counterparts

it is not surprising if you know how BD banks work

 

[Nilgiri]

I was promised a backbone being broken....I demand a refund....I got places to be you know

 

[idune]

it is not surprising if you know how BD banks work

you have no clue...

It is not related to typical bank operation BUT it is because
1) systemic looting by awami league party thugs who were appointed in all major banks.
2) condition of industries and business are so bad that non performing loan had gone to alarming level
3) major sector of economy (industrial growth, construction, real-estate, manpower export) are in downward trend
4) Even physical security of Bangladesh bank was compromised and made way for cash looting and hacking of 80 million

All these factors created distrust on Bangladeshi banking institutions. This will have adverse impact on export and import settlement which most Bangladeshi banks rely for profit margin. This sets stage for demise of Bangladeshi banks and banking industry. awami league setting stage for indian and foreign banks to take over Bangladeshi banking systems just like hindu jamider once ran high interest business in Bengal.

 

[BDforever]

you have no clue...

It is not related to typical bank operation BUT it is because
1) systemic looting by awami league party thugs who were appointed in all major banks.
2) condition of industries and business are so bad that non performing loan had gone to alarming level
3) major sector of economy (industrial growth, construction, real-estate, manpower export) are in downward trend
4) Even physical security of Bangladesh bank was compromised and made way for cash looting and hacking of 80 million

All these factors created distrust on Bangladeshi banking institutions. This will have adverse impact on export and import settlement which most Bangladeshi banks rely for profit margin. This sets stage for demise of Bangladeshi banks and banking industry. awami league setting stage for indian and foreign banks to take over Bangladeshi banking systems just like hindu jamider once ran high interest business in Bengal.

you are talking to someone who has significant engagement with banking ppl

 

[Nilgiri]

you are talking to someone who has significant engagement with banking ppl

 

[BDforever]

 

[idune]

Banks' non-performing loans (NPLs) likely to swell further in next quarters

The volume of non-performing loans (NPLs) in the country's banking sector might even grow bigger at the end of the current quarter (July-September), some senior bankers have expressed the fear.

The bankers have a feeling that some borrowers would default on repayments against both rescheduled and restructured large loans during the remaining quarters of the current calendar year.

The situation on non-performing loans (NPLs) may deteriorate in the coming quarters as the existing position of classified credits is not reflected properly, Nazrul Huda, former deputy governor of the BB, told the FE Wednesday while explaining the latest situation.

The senior banker's observations came in the wake of the NPL amounts having risen by more than 23 per cent or Tk 120 billion in the first half (H1) of the current calendar year.

The trend in the recovery of NPLs during the first two months of current quarter has not been encouraging at all, said Syed Mahbubur Rahman, managing director and CEO of Dhaka Bank Ltd.

The volume of non-performing loans (NPLs) rose to Tk 633.65 billion as on June 30 last from Tk 513.71 billion as on December 2015. It was Tk 525.19 billion a year before.

"The amount of classified loans in the banking system may rise in the near future because some borrowers may fail to make repayment of instalments against restructured large loans along with rescheduled ones," Mr. Huda forecast.

Most of the restructured large loans' repayments are scheduled to start in the third quarter of this calendar year at the end of the one-year grace period, according to a BB senior official.

Most of the proposals on large loan restructuring were approved between July and August last year (2015), he explained.

The central bank earlier had cleared proposals of 10 business groups for the restructuring of their large loans worth Tk 140.48 billion.

A total of 22 commercial banks had earlier forwarded the proposals to the BB for approving loan restructuring on behalf of their clients.

The share of classified loans also rose to 10.06 per cent of the total outstanding loans during the period under review from 8.79 per cent six months before.

"Some rescheduled loans along with fresh ones might enter non-performing territory during the period under review," Nurul Amin, Chief Executive Officer and (CEO) and Managing Director (MD) of Meghna Bank Limited, said while explaining the upturn in the NPLs.

"It's a quite alarming situation in the banking system for the rest of this calendar year," he noted.

Mr Amin, also former chairman of the Association of Bankers, Bangladesh (ABB), advised that the bankers take vigorous efforts for recovering their non-performing loans for improving such situation.

Talking to the FE, Dhaka Bank MD said the rise in the NPLs was also a result of aggressive banking by a section of commercial banks because of their excess liquidity.

The classified loans cover substandard, doubtful and bad/loss of total outstanding credits which stood at Tk 6300.19 billion as on June 30 last from Tk 5846.15 billion as on December 31. It was Tk 5986.48 billion as on March 31, 2016.

Talking to the FE, another BB official said the amount of NPLs increased significantly during the period under review mainly for a lack of due diligence on part of the bankers along with good governance particularly in the public banks.

During the period, the total amount of NPLs with six state-owned commercial banks (SoCBs) rose to Tk 300.77 billion from Tk 237. 45 billion as on December 31 last. It was 272.89 billion in the Q1 of this calendar year.

On the other hand, the total amount of classified loans with 39 private commercial banks (PCBs) reached Tk Tk 253.15 billion in the Q2 from Tk 207.60 billion in the final quarter of last year. It was Tk 253.31 billion as on March 31last.

The NPLs from nine foreign commercial banks (FCBs) rose to Tk 21.56 billion during the period under review from Tk 18.97 billion in the Q4 of 2015. It was Tk 18.22 billion of the Q1 of this calendar year.

The classified loans with two development-finance institutions (DFIs) rose to Tk 58.17 billion in the H1 of 2016 from Tk 49.69 billion six months before. It was Tk 49.69 in the Q1 of this calendar year.

The highest level of classified loan concentration has taken place on commercial purposes and large-and medium-scale industries, standing at 16.7 per cent and 14.6 per cent in 2015, according to the central bank's latest report.

It was followed by 11.9 per cent and 11.3 per cent respectively in readymade garments and textiles and working capital particularly for large-and medium- scale industries. Currently, the rescheduled loans constitute a significant portion of the banks' total loan portfolio, the BB said in the report.

In 2015, the rescheduled loans were 4.5 per cent of banks' total outstanding loans, 5.0 per cent of total unclassified loans and 28.0 per cent of total stressed advances, compared with 3.4, 3.8 and 25.9 per cent respectively in the previous calendar year.

From 2014 to 2015, the total amount of rescheduled loans had increased by 50.1 per cent, in spite of the availability of large loan-restructuring facilities, it added.

Asked about the figure of rescheduled loans that have already got into classified territory, the central banker said the BB was not aware of transformation of such loans.

http://www.thefinancialexpress-bd.c...NPLs-likely-to-swell-further-in-next-quarters

 

[Nilgiri]

Bangladesh has to be careful of bubbles, its way too early in its economic growth to have these sort of NPA figures.