April Remittance inflow drops in March as dollar weakens. IFIC BANK LIMITED HR Development & Training Institute Head Office, Dhaka

Transcription

1 April-2012 Moody s bank review may mark new era of lower ratings The largest US banks including Morgan Stanley, Bank of America and Citigroup are facing what could be a historic shift to lower credit ratings which could increase their cost of funding and reduce competitiveness in their capital markets businesses. Moody s Investors Service is reviewing 15 of the world s largest banks for possible credit ratings downgrades in mid-may, and broad cuts could send banks on average to their lowest historical levels. In the US Morgan Stanley could see the largest cut after being warned of a possible threelevel downgrade to the Baa category, a rating that has traditionally been associated with more speculative risk than some investors and trading partners have been comfortable with. Bank of America and Citigroup, which are currently lower rated than Morgan Stanley, are also under review for downgrades to the same Baa2 level, and all three-banks are under review to lose their top tier short-term debt rating which would effectively cut their access to some short-dated funding markets. Moody s action is unlikely to spark funding stress at the banks. Many banks have been dramatically scaling back their reliance on short-term and ratings-sensitive funding since 2008, when fears over exposure to risky mortgage-backed debt caused short-term debt investors to pull back from lending to the firms. The banks have also increased deposits and capital cushions, making them less vulnerable to the type of client runs that felled banks including Bear Stearns and Lehman Brothers. Nevertheless, new downgrades may disrupt some short-dated debt markets and have knock-on effects for municipal issuers, who sell debt that is backed by the strong bank ratings. Downgrades may also hurt the lowest-rated banks relative to competitors including JPMorgan and Goldman Sachs which are expected to maintain ratings in the more solid single-a category. New Age: Remittance inflow drops in March as dollar weakens IFIC BANK LIMITED HR Development & Training Institute Head Office, Dhaka Inflow of remittance dropped further in March from that of previous two months because of the decline in value of dollar against Bangladeshi Taka. The country received remittances worth $1.107 billion in March whereas the migrant Bangladeshis had sent $1.13 billion in February and a record $1.22 billion in January, according to Bangladesh Bank data released. The inflow of remittance in July-March of the current financial year, however, was per cent higher than that of the same period of last financial year. The remittance inflow in March declined as the interest of expatriate Bangladeshis to send more money faded in the month because of declining value of US dollar against Taka. The rate of dollar decreased to around Tk 81-Tk 82 in March from that of Tk 85-Tk 86 in January. The remittance inflow in January and February hit records as migrant Bangladeshis sent more dollars for getting higher rate for the greenbacks. There was almost no growth in remittance inflow in March compared to the same month of the previous fiscal year when the monthly DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 1 of 21

2 remittance was $1.102 billion. During July-March, the total remittance stood at $9.53 billion whereas the total remittance was $8.61 billion in July-March of financial years. New Age: BB warns against illegal banking Bangladesh Bank on 1 st April asked people not to transact with unauthorized financial institutions. In a notice the central bank said: Some institutions are operating business in different districts under various names and collecting money from people, luring them by prospect of getting high interest and attractive profits. People are being requested not to make any investment in these organizations because there is a possibility of being cheated and these institutions have no approval from the appropriate authorities. Daily Star: Slight fall in remittance Inward remittances fell 1.77 percent to $1.11 billion in March from a month ago, but analysts projected a bright outlook for More than $1 billion was remitted from abroad by Bangladesh's migrant workers every month, except September and November, in the first nine months of the current fiscal year, according to data from the central bank. In February, the remittance inflow stood at $1.13 billion. Remittance increased by 11 percent to $9.53 billion in the first nine months of current fiscal year. The banking regulator projected that remittance will be worth around $13 billion in the current fiscal year, which will have a positive impact on the country's balance of payments. The exchange rate in the inter-bank foreign exchange market hovered around Tk. 82 against the dollar last month, which was over Tk. 85 a month ago. Daily Star: High inflation has positive impact on remittance inflow A research work of the Bangladesh Bank (BB) has found that the country's high inflation has positive relationship with its remittance earning. The positive relationship implies that higher inflation in home country, which reduces the purchasing power of migrants' families, induced the migrants to send more remittance to Bangladesh. Remittance, which emerged as the key driver of economic growth, can help improve the country's development prospects, maintain macro economic stability, and mitigate impact of adverse shocks. The other factors to affect remittance earnings are exchange rate, wage rate, and regulatory as well institutional arrangements, made by the government. Fin. Exp: US sues Royal Bank of Canada for massive fraud US regulators on April 02, 2012 announced charges against Royal Bank of Canada, accusing the major Canadian bank of washing hundreds of millions of dollars through fraudulent trading. The US Commodity Futures Trading Commission said it had filed a complaint in federal district court in New York accusing RBC of conducting a multi-hundred million-dollar wash sale scheme in connection with exchange-traded stock futures contracts. The Canadian bank and financial services company does business in New York. The trading scheme was allegedly designed as part of RBC s strategy to realize lucrative Canadian tax benefits from holding certain public companies securities in its Canadian and offshore trading accounts, the CFTC said. CFTC also charged that the bank concealed material information from, and made material false statements to, a futures exchange. New Age: DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 2 of 21

3 NBR selects 26 banks for online tax payment The National Board of Revenue has selected 26 commercial banks through which taxpayers would be able to pay their income tax, value-added tax and duties under e-payment system. The taxpayers having accounts with these banks linked with Q-cash network will be able to pay their taxes at anytime from anywhere under e- payment system using Q-cash debit and credit cards and bank accounts. Gradually other banks would come under the network for enabling e-payment. Taxpayers will also be able to pay taxes using electronic fund transfer services of Bangladesh Post Office through Q-cash. The revenue board is planning to introduce e- payment of taxes from early May in a bid to simplify the tax collection procedures, reduce hassle of taxpayers and make the system transparent. In this system, taxes could also be paid online if the taxpayers have the access to online banking. The NBR will soon sign an agreement with Sonali Bank and Q-cash to introduce the system. After signing the agreement, the tax administration will go for a trial to be started after mid-april to find out whether there are any flaws in e-payment system. Though all the taxpayers will be able to pay their taxes through e-payment, the revenue board will make e-payment system mandatory for individual and corporate taxpayers under large taxpayers unit and some other tax offices. Under e-payment system, taxpayers could pay their taxes using Q-cash cards from ATM (automated teller machine) booths of selected banks or using internet banking instead of traditional system in which taxpayers have to go to Bangladesh Bank or Sonali Bank for paying taxes through treasury chalan or pay order. The board will carry out a massive campaign before and after introduction of the system to create awareness and encourage people for using it. The banks selected for handling taxes include Basic Bank, Bank Asia, Bangladesh Commerce Bank, Eastern Bank, IFIC Bank, ICB Islamic Bank, Janata Bank, Jamuna Bank, Mercantile Bank, Mutual Trust bank, National Bank, NCC Bank, Pubali Bank, Shahjalal Bank, Sonali Bank, Social Islami Bank, Standard Bank, State Bank of India, The City Bank, Trust Bank, Uttara Bank, EXIM Bank, Dhaka Bank, Southeast Bank, UCBL and BRAC Bank. New Age: BB approves three NRB banks The central bank has approved three new commercial banks sponsored by non-resident Bangladeshis (NRBs) on the condition that those would contribute to boosting the inflow of foreign exchange. The three approved NRB banks are: NRB Commercial Bank Limited, NRB Bank Limited and NRB Bank Limited. The name of one NRB Bank will require to be changed. The new NRB bank will be established with a paid-up capital of not less than Tk 4.0 billion. The shareholding of the NRB bank will be 50 per cent from the NRB sponsors and the rest 50 per cent will be collected through public offerings. Each sponsor of the NRBs will have to hold a minimum stake of Tk 100 million in the holding of shares and the maximum stake will be 10 per cent of the bank's total paid-up capital. Fin. Exp: Pvt. sector credit growth rises in Feb The expansion of credit flow to the private sector witnessed a rising trend in February 2012, following increased trade financing, after facing fall in the past few months. The rate of private sector credit growth rose to per cent in February from per cent in January, according to the central bank statistics. The credit flow to the private sector rose to Tk billion in February 2012 on a year-on-year basis from Tk billion in the corresponding month of the previous year, the BB data showed. The import orders for scrap-vessels increased by 123 per cent to $ million in February 2012 from $60.26 million in January 2012, while the letters of credit (LCs) against imports worth $66.82 million were settled in February against $83.28 million in January. The central bank unveiled a 'restrained' monetary policy on January 26, aiming to bring down inflation to a single-digit from the current level of over 10 per cent through discouraging credit flow to unproductive sectors. Fin. Exp: Six more new banks get BB approval The central bank has approved six more private commercial banks (PCBs), aiming to help strengthen the ongoing financial inclusion programmes through bringing unbanked people under the banking network. The six approved PCBs are: Union Bank Limited, Modhumoti Bank Limited, the Farmers Bank Limited, Meghna DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 3 of 21

4 Bank Limited, Midland Bank Limited and South Bangla Agriculture and Commerce Bank Limited. The proposed chief executive officers (CEO) of the approved PCBs will have to present their business plan before the board. The authorities concerned of the approved PCBs will have to deposit the amount of their paid-up capital worth Tk 4.0 billion with the central bank, before starting their operation, the BB deputy governor said. The proposed chairmen of newly-approved banks are: Union Bank Limited -- Shahidul Alam, Modhumoti Bank -- Humayun Kabir, Farmers Bank -- Dr Mohiuddin Khan Alamgir, Meghna Bank -- AHN Ashiqur Rahman MP, Midland Bank -- Moniruzzaman Khandker and South Bangla Agriculture and Commerce Bank - - SM Amjad Hossain. The population per branch (21065) and the ratio of loan accounts per 1000 adults (42) suggest that the outreach of the formal financial sector in Bangladesh is lower than that in India (14485 and 124 respectively) and Pakistan (20340 population per branch and 47 loan accounts per 1000), according to the statement. For new banks the ratio of opening rural and urban branch will be 1:1 which will help increase bank branches in rural areas and improve financial inclusion, the central bank said. Earlier, 37 applications were submitted to the central bank for setting up of new PCBs. Of them, 21 were rejected by a preliminary scrutiny committee mainly due to lack of necessary papers and documents. Currently, a total of 47 commercial banks are in operation in Bangladesh. Fin. Exp: Import growth declines to 13.63pc in July-Feb The country s import bill payment in July-February of the current financial year grew by per cent from that of the same period in the previous year when payment grew by per cent year-on-year. According to data released by BB, the settlement of letters of credit for import in July-February stood at $ billion, growing by per cent from the same period of FY LC settlement in July-February of FY was $ billion, or per cent higher than the figure of same period of previous FY Import payments declined because of tighter monetary policy taken by the central bank amid shortage of foreign currency reserve. The forex reserve tumbled below $10 billion mark after an import payment of $893.5 to the Asian Clearing Union in the first week of March. Short supply of dollar had also contributed to lower import orders during the period. Most of the private commercial banks were now facing dollar shortage. According to BB data, the opening of LCs had registered a negative growth of 7.54 per cent in July-February compared to that of per cent growth in July-February of FY LC opening in July-February stood at $ billion against $ billion during the same period of the previous financial year. The growth in settlement of LCs or actual import payment for industrial raw materials dropped by per cent and capital machinery by per cent in July-February compared to that of per cent and per cent growth respectively in the same period of FY LC settlement in the first seven months of the current financial year for industrial raw materials and capital machinery was worth $ 9.21 billion and $ 1.58 billion respectively against $ 8.18 billion and $ 1.32 billion in the corresponding period of the previous financial year. On the other hand, LC opening for industrial raw materials and capital machinery in July-February posted a negative growth of 8.64 per cent and per cent compared to that of per cent and per cent respectively in the same period of the previous financial year. LCs worth $9.66 billion and 1.45 billion were opened for industrial raw materials and capital machinery in July-February against $10.50 billion and $1.98 billion in the corresponding period of last financial year. LC settlement for food grains in July-February registered a negative growth of per cent from per cent in the same period of FY LC settlement for food grains in July- February of the current financial year was worth $ million against $1.11 billion in the same period of the previous year. New Age: Asian banks warm to bond market innovation A shortage of US dollars, new banking regulations and strong investor demand means Asian banks are set to help spur long-awaited innovation in the region s debt capital markets. Singapore is consulting on new guidelines to help its banks issue covered bonds and Hong Kong plans to study investor appetite for similar products, while banks across Asia are looking at forms of debt previously unseen in the region, such as hybrid or perpetual bonds. Although most Asian banks are flush with local currency retail deposits, many have been struggling to get access to enough US dollars, so they are looking at new ways of issuing bonds to raise these funds. In Singapore, for example, Fitch Ratings estimate that while local banks overall loan-to-deposit ratio is around 90 per cent, the figure for their US dollar trading books exceed 100 per cent. The incoming Basel DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 4 of 21

5 liquidity rules are also encouraging regulators in the region to help develop markets for highly-rated liquid assets that banks can hold to comply with more stringent capital requirements, such as covered bonds. All these moves are likely to be lapped up by investors, with demand for Asian bank bonds strong given their reputation as being some of the safest lenders in the world in which to invest. Demand for unsecured Asian corporate bonds has been buoyant so far this year, with issuance in first quarter alone more than half that seen for the whole of The Monetary Authority of Singapore issued a consultation on covered bonds last month, saying that the assets could provide an additional longer-term funding source for banks. Covered bonds are secured against a basket of assets, typically home mortgage loans. They are a popular safe-haven holding for investors, as if the issuer goes into bankruptcy investors can lay claim to the underlying assets. For banks, covered bonds also tend to be a cheaper source of funding as investors are willing to accept a lower yield. New Age: Credit growth in private sector increases in February The credit growth in private sector in February 2012 increased for the first time in the current financial year due to high growth of opening of letters of credit for certain products. According to the BB data, the private sector in February borrowed Tk 38, crore, which was per cent higher than the same month of the last financial year when the borrowing was Tk 31, crore. BB data showed that the private sector credit growth had decreased continuously from July to January of FY compared to that of the same months of the previous fiscal year. The credit growth in July reached per cent, in August per cent, September per cent, October per cent, November 19.33, December per cent and January per cent. But the credit growth in February increased from that of the previous January, BB data showed. In its latest half-yearly monetary policy for January-June 2012, the central bank stated that it would aim at containing inflationary pressures through discouraging credit flow to public and private sectors. BB had also taken another contractionary monetary policy for July-December Under the new monetary programme, credit growth rate for public and private sectors was envisioned to be limited to 31 per cent and 16 per cent respectively by the end of June 2012 from 62 per cent and 18 per cent at the end of December BB data showed that particularly the government sector in February had borrowed Tk 89, crore, which was per cent higher compared to that of February On the other hand, the public including government sector credit growth in February stood at per cent compared to that of the same month of the previous year. New Age: Exports earning turns negative in March The country s export earnings in March for the first time showed negative growth of 7.23 per cent in current fiscal year totaling $1, million against $2, million fetched in March last year. The strategic target of export earning for March this fiscal was $ million. According to the statistics of the Export Promotion Bureau, export earnings in the first three quarters (July-March) of the current fiscal year, however, witnessed a per cent growth to $17, million, driven by moderate performance of RMG, frozen foods, footwear, and leather and leather products. The overall figure for the nine-month period was, however, 6.15 per cent lower than the strategic target of $19, million. Total export earnings during the last fiscal stood at $22, million, which was higher by per cent than the target of $18,500 million. According to the EPB statistics for the July-March period, woven garments fetched the bulk of the earnings with $7, million that represented a per cent growth over the same period last year while knitwear accounted for $6, million having a growth of 5.92 per cent. During the period, the export of home textiles totaled $ million with a good growth of per cent; footwear exports fetched $ million, primary commodities $ million, frozen foods including frozen fish, shrimps and others $ million, and agricultural products $ million. Of the other major performing commodities, fruits exports totaled $40.78 million with a 49 per cent growth, computer services (July-January) million having per cent growth, cement, salt and stone $10.07 million while tea export accounted for $2.52 million with a 9.09 per cent growth. The export trend for leather and leather products and plastic products maintained their upward trend during the July-March period. Leather exports totaled $ million, while leather products $59.26 million, cotton and cotton products together earned $77.80 million, plastic products $67.15 million and rubber fetched $11.83 million. The country also earned $25.62 million from ceramic exports. The export of jute and jute goods during the July-March period declined to $ million, registering a DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 5 of 21

6 12.49 per cent fall. Raw jute exports fetched $ million with a per cent decline, jute yarn and twine $ million, and other items brought some $34.76 million. Jute sacks and bags, however, notched a positive growth of 7.82 per cent as exports totaled $ million. Engineering products, including iron and steel, bicycle and electronic products fetched almost $ million. Engineering equipments fetched $35.89 million with a growth of per cent. The export of manmade filaments and staple fibres totaled $55.88 million, caps $36.60 million while the export of ships, boats and floating structures fetched $24.32 million. The export of handicrafts totaled $3.49 million, while paper and paper products $20.10 million, furniture $18.84 million, chemical products $85.52 million (including pharmaceuticals $34.13 million), while ores, slag and ash brought $19.77 million. Specialized textiles, including terry towel, showed a negative growth of per cent, earning $96.20 million during the July-March period of the current fiscal while export of petroleum byproducts accounted for just $ million. New Age: Trade deficit hits $5.70b in 9 months on falling export Despite the decrease in import payments, the country s trade deficit soared by per cent to $ 5.70 billion in the first eight months of the current financial year compared to the same period of FY due to falling export growth. The current account balance from July to February also declined by per cent year on year but the balance continued to remain in positive zone for the sake of double digit remittance growth in the period. A fall in imports in the first eight months could not help much in narrowing the trade gap amid a sharp decline in export growth. According to Bangladesh Bank data, the country s import payments surged to $ billion against exports worth $ 16 billion in July-February in the current FY In the first eight months this year, import grew by per cent against per cent in the same period last year. However, during the period this year, exports rose by per cent, while the growth was around percent last year. The total trade gap was $ 4.85 billion in July-February FY whereas the trade gap in the first eight months of the current financial year stood at $ 5.70 billion. Import of food, raw materials and capital machinery went down but that of petroleum marked a sharp rise in the first eight months. New Age: BB's e-tender cuts muscle power, time The introduction of e-tender at Bangladesh Bank enables bidders to take part in the bidding freely in a process that eliminated domination of muscle power and shortened the procurement cycle. Since its introduction in May 2010, the banking regulator gave 350 contracts out of 400 to winning bidders for procurement of goods through e-tender. The BB developed the electronic tender system software with own expertise and resources for tender call, collection and evaluation to quicken its procurement process. Users will have to sign up for the e-tender system with valid addresses. A user can log into the system with an ID and password. Unregistered users who want to participate in the bidding have to click the link 'Register Now' of the tender site. Daily Star: Exports falter on Euro debt crisis Exports grew at a slow pace at 0.15 percent to $1.99 billion in March from a month ago for the ongoing debt crisis in the Eurozone. The country's export figure has been showing a slow growth over the last few months due to a drop in demand for the main export earner, readymade garments (both woven and knitwear), in the debt-ridden Eurozone. Exports fell short of the monthly target by percent in March, while such shortfall was 7.97 percent in February, according to data released by state-owned Export Promotion Bureau on 9 th DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 6 of 21

7 April. The monthly target for March was $2.34 billion. Earnings fell by 7.23 percent in March, compared to the same month a year ago. This is the first time that the monthly earnings have gone in the negative territory in the current fiscal year. Exports in July-March registered a percent growth to reach $17.89 billion compared to the same time last fiscal year, data shows. Bangladesh's knitwear exports rose by 5.92 percent to $7 billion and woven by percent to $7.10 billion in July-March from the same period a year ago. Daily Star: BB to close counters for selling new notes, exchanging torn ones The Bangladesh Bank has decided not to sell new notes of currencies or exchange old and torn notes from its counters from May 2. The central bank in a statement said people would be able to buy new notes and exchange their torn currency notes and mutilated coins for new ones at over 8,000 branches of all 47 scheduled banks from May 2. The BB said that the decision to close down the central bank counters was taken for tightening the security of the BB, which is one of the key point installation institutions of the country. Besides, the measure has been taken so that the people across the country could fulfill their business related demand by exchanging their torn currency notes and mutilated coins for new ones and buying new notes from the banks from their respective area. As part of the move, the central bank will provide the scheduled banks with new currency notes and coins. The central bank will monitor the exchanging process by the scheduled banks. New Age: BB to measure 'core inflation' Bangladesh is going to introduce the system of measuring 'core inflation' along with the existing headline inflation to help formulate credible monetary policy and forecast inflation. Core inflation is a measure of inflation which excludes temporary noise components, notably food and fuel, from consumers' price index (CPI) basket. The key objective of computing core inflation is to separate the components of 'headline inflation', officially known as general inflation, that are caused by non-monetary events as these price changes do not reflect the impact of underlying monetary policy decisions. The central bank has already calculated core (non-food, non-fuel) CPI inflation using data of the Bangladesh Bureau of Statistics (BBS) on trial basis which will be used by the policy makers in the near future. The core inflation rose to per cent in March last from per cent of the previous month, according to the central bank estimate. Currently, the central bank monitors the 12- month moving average of CPI inflation in defining the underlying trend that averages out the short-term or transitory components (seasonal impact) in the CPI. Fin. Exp: New banks must show competence to get licence : Bangladesh Bank Bangladesh Bank governor Dr Atiur Rahman said the six new banks that were given approval amid speculations must prove their competence to get the final central bank licences. "This (approval) is just the letter of intent, which was issued after diligent scrutiny of procedures. But they must prove their competence to get the Bangladesh Bank licence," Rahman told. The central bank chief said the banks must show a paid up capital of Tk 4.0 billion, doubled the amount compared to the previous, and comply with other conditions for getting the final nod. According to the guideline for establishment of banks issued by the central bank in September last year, the bank would be a public limited company incorporated in Bangladesh, having a Tk 4.0 billion paid-up capital. An entrepreneur can hold a minimum of Tk 100 million in shares or a maximum of 10 per cent of the total shares. No share of the entrepreneur can be transferred in three years without the central bank's permission. Fin. Exp: Banks lag behind in farm loan disbursement target Banks disbursed only per cent of their annual target of agricultural loans in the first nine months of the current financial year. According to the latest provisional data released by Bangladesh Bank, state-owned, private and foreign commercial banks, and the specialized banks from July to March of FY collectively disbursed Tk 9, crore in farm loans against the annual disbursement target of Tk 13,800 crore. Agricultural loans disbursed by the banks in the same period of previous financial year totaled Tk 9, crore, per cent of the annual target of Tk 12, crore in agriculture credit. BB data, however, showed that the agricultural credit disbursement from July to March of the FY slightly increased by 0.38 per cent from that of the same period of the previous financial year. Banks usually disburse DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 7 of 21

8 large amounts of agricultural loans during Boro season. For this reason, the agriculture loan disbursement significantly increased in the pervious month than that of the other months of the current financial year, he said. Moreover, the private and foreign commercial banks also increased their targeted loan disbursement in the period due to pressure from the central bank. BB data showed that the state-owned commercial banks and the two specialized banks in the first nine months of the current financial year had disbursed Tk 6, crore in farm loans or per cent of their annual disbursement target of Tk 8,510 crore. The PCBs and the FCBs in the period disbursed Tk 3, crore in agricultural loans, which was per cent of their total annual disbursement target of Tk 5,290 crore. In the same period of the previous financial year, they disbursed per cent of their annual target of the agricultural lending. New Age: Automation enables BB to double cheque-clearing speed The high value cheque clearing has doubled and the duration of clearing time has reduced significantly maximizing speedy payments as Bangladesh Bank is clearing high value cheques and regular value cheques with an automated cheque processing system. Through the automated system, the central bank cleared an average 85,000 regular value cheques and high value cheques worth Tk 4,700 crore in a day while some cases earlier took 7 to 30 days. According to BB, of the total 85,000 cheques, 80,000 are regular value (below Tk 5 lakh) and the remaining 5,000 are high value (worth Tk 5 lakh and above) cheques. The number of high value cheques rose to 5,000 in the automated system from 2,000 in the manual system, and the number of regular value cheques also increased to 85,000 from 70,000 in the previous system. The BACPS started operations in October 2010 by replacing the manual cheque clearing system with image and date-based cheque truncation system where Magnetic Ink Character Recognition encoded cheques are exchanged in encrypted form between the participating banks through a secured communication link. Daily Star: BB to detect gaps in import costs to get right Bop scene The central bank has initiated a step to identify the clandestine income and expenditure related to export and import trade aiming to have a correct picture of the balance of payments (BoP) situation of the country. The Bangladesh Bank (BB) took the step following suggestions in this regard made by International Monetary Fund (IMF), which said the country's BoP is not being measured correctly. According to an observation of the IMF, the country's import expenditure is not measured correctly as the letters of credit (LCs) don't mention the freight charges of imports. The country's BoP deficit reached US$ 516 million in the July-February period of the current fiscal , which IMF and the central bank have predicted to be increasing further if the actual import costs are mentioned. The BoP deficit was $813 million in the July-January period of the current fiscal, while the deficit was only $222 million during the same period in fiscal. Fin. Exp: BB governor warns against illegal banking Amid growing unauthorized financial institutions, Bangladesh Bank governor urged people to remain alert against illegal banking. The institutions that are doing business without approvals aren t banks. Their transactions are illegal. People need to understand which institutions are banks and which aren t. The central bank governor was speaking as chief guest at a bankers summit, Fifty Years of Banking in Bangladesh- Vision Governor said the country s banking sector had grown several-fold since independence in 1971 in tandem with the uninterrupted spell of steady, stable growth of the economy. Just one indicator may be enough to demonstrate the spectacular magnitude of banking business growth. Credit and investment assets of scheduled banks amounted in December 1972 to a minuscule Tk 7.07 billion; this stood 654 fold higher at Tk 4, billion as of December Excellence in banking services would require quick attention to and remedy to customer s grievances. Banks will need to attach the same high priority to this in their own strategic plans, putting in place processes and access channels like help desks; and above all, sensitising bank personnel to respond properly and swiftly to customer grievances. The central bank was looking forward to steadily increasing openness and integration of our financial markets with the global financial system, for widening the cost effective access to investment resources from the global savings pool. Strategic plans of banks will need to have corresponding objectives and action agenda for strengthening external contacts and correspondent relationships. The central bank head also said banks would need to carry out stress-testing exercises regularly DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 8 of 21

9 to identify and address the emerging institutional vulnerabilities against shocks of both internal and external origins. New Age: Call to lower gap between lending and deposit rates Economists and bankers have recommended slashing the interest rate spread by creating competition among banks. The recommendation came at the three-day Bankers Summit organised by Financial Excellence Ltd (FinExcel), a private advocacy organisation on April The commercial banks will have to take effective measures to minimise the asset-liability mismatch by improving fund management. The speakers urged the government to ensure operational independence of Bangladesh Bank for better monitoring and supervision, saying the central bank should act without fear or favour. They also feared that the new banks may face problems in recruiting skilled manpower, particularly to manage their foreign exchange operations. The BB chief said bank lending continues to be channeled largely to well-off borrowers, often with insufficient diversification and inappropriate asset-liability maturity mismatches. Credit and investment assets of scheduled banks grew to Tk 4, billion in December 2011 from Tk 7.07 billion in December Daily Star: Limiting of public sector credit growth within 31pc unlikely The Bangladesh Bank s target to contain public sector credit growth within 31 per cent by the end of the current financial year might not be achieved as the government decided to increase its bank borrowings by more than 47 per cent to Tk 27,900 crore. A meeting of the cash and debt management committee at the secretariat on March 28 decided to increase the government borrowing target from banking source. Under the revised target, the government will borrow Tk 27,900 crore from the country s banking system against the original budgetary target of Tk 18,957 crore for the current fiscal year. In its latest half-yearly monetary policy for January-June 2012, BB stated that it would aim at containing inflationary pressures through discouraging credit flow to public and private sectors. Under the new monetary programme, credit growth rate to the public sector, including the government, and private sector would be limited to 31 per cent and 16 per cent respectively by the end of June 2012 from 62 per cent and 18 per cent at the end of December According to the latest data released by BB, the government s bank borrowing increased to Tk 18,013 crore on April 5, 2012 from Tk 15,117 crore as on March 3. BB data showed that the government s bank borrowing had stood at Tk 21,321 crore on December 4, The government s borrowings from banks, however, decreased in phases later, but the borrowing significantly increased recently. BB data showed that the public, including government, sector credit growth in January and February had stood at between per cent and per cent compared with that of the same months of the previous year. On the other hand, private sector credit growth in the two months stood at between per cent and per cent from that in the same months of the last financial year. New Age: BB issues LoIs to nine new banks The Bangladesh Bank has issued Letters of Intent (LoI) to the newly-approved nine commercial banks including three non-resident Bangladeshi banks, asking them to fulfill 29 conditions within the next six months. The newly-approved banks would get the licences from the central bank if they could fulfill the conditions within the specified timeframe. The banks would have to start their business activities within six months from the date of issuing LoI. The process of LoI issuance to the new banks was completed on April 17,2012. The new banks will have maximum 20 directors in their boards. But once the proposed bank company act is passed, the banks will have to bring the number of directors down to 13. The new banks will have to disburse in the agricultural sector at least 5 per cent loan of their total credit disbursement. A sponsor/director of a new bank would hold minimum share of Tk 1 crore and highest 10 per cent of the total capital of the bank. Earlier this month, the central bank approved six private commercial banks and three NRB banks. New Age: 'Rural women get little credit' Women entrepreneurs in rural areas have little access to credit as much of 15 per cent of small and medium enterprises (SME) loans goes to their urban counterparts. Leaders of women entrepreneurs urged banks to DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 9 of 21

10 funnel at least three per cent of SME lending to the rural areas where access to finance is limited. The project is aimed at facilitating the access of rural women entrepreneurs to the SME credit and marketing their products by involving local lawmakers, which will ultimately help formulate a separate policy for women entrepreneurship development. The chamber leader called upon the policymakers to formulate specific policy guidelines for the development of women entrepreneurs so that the rural women entrepreneurs get a congenial environment and the whole process not remains urban centric. Fin. Exp: Bureaucratic tangle 'a major hindrance to CSR activities' Governor of the central bank and leaders of the country's banks and financial institutions recently expressed their resentment over the existing bureaucratic complexities in implementation of the tax rebate facility for spending on CSR (corporate social responsibility) activities. Terming the bureaucratic tangle 'a major hindrance' to the promotion of CSR activities in the country, they said the National Board of Revenue (NBR) is unwilling to give the existing 10 per cent tax rebate on the CSR spending. "There are many bureaucratic hurdles and many of banks do not want to break those hurdles," the BB governor said. He said he was trying hard to facilitate the banks in terms of easing the process but found bureaucracy to be much difficult even for a central bank chief. He urged the bankers, who really want to contribute, not to be disheartened with the bureaucracy. Fin. Exp: Import payments decline in March The country s import bill payment in March declined sharply compared to the same month of the last financial year due to tighter monetary policy taken by the central bank amid shortage of foreign currency reserve. Provisional data of Bangladesh Bank showed that the settlement of letters of credit for import declined by 3.53 per cent in March compared to March 2011 when import payment grew by per cent year-on-year. The total import bill payment in March stood at $ 2.78 billion against $ 2.88 billion in March The import payment in March 2010 was $ 2.31 billion. LC settlement in March also declined by 3.39 per cent compared to the previous month of February when import payment grew by per cent year-on-year. Besides, the growth in opening of letters of credit in March declined by per cent year-on-year compared to per cent growth in March 2011 year-on-year. The total LC opening in March stood at $ 2.81 billion against $ 3.45 billion in March The LC opening in March 2010 was $ 2.62 billion. New Age: Branch opening policy to deepen financial inclusion The banking facilities for the poor in Bangladesh are far better than those in India and Pakistan, Bangladesh Bank Governor said. He also hinted at more actions being taken for facilitating the access on the part of the poorest section of the country's population to the banking facilities. Dr Atiur said 1:1 branch approval policy will further help deepen financial inclusion in Bangladesh. Already three million people among the poorest segment among the country's population have ten-taka accounts for getting payments relating to safety net programmes. Meanwhile, the World Bank (WB) report said only 37% of women in developing countries have an account, whereas 46% of men do. That gap is even bigger among those in poverty: Women living below $2.0 a day are 28% less likely than that of the male population having bank accounts. Fin. Exp: IMF raises $430 billion for crisis firewall Members of the International Monetary Fund will discuss future action plans after the IMF raised $430 billion in new funds for crisis intervention, with China and other emerging economic giants taking part. After weeks of seeking pledges for its global firewall, the fund said the BRICS group China, Russia, India and Brazil had helped put it over its goal. We have commitments that are north of $430 billion. That almost doubles the lending capacity of the fund, IMF managing director said after meetings of the IMF and the finance chiefs of the Group of 20 economic powers. The figure signals the strong resolve of the international community to secure global financial stability and put the world economic recovery on a sounder footing. The BRICS and a handful of middle-sized economies came in with $68 billion at the end, though specific amounts were not mentioned. That came on top of $200 billion promised by the eurozone, $60 billion from Japan, and $15 billion each from Britain, South Korea and Saudi Arabia each pledged $15 billion. Smaller amounts from the DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 10 of 21

11 Nordic countries, other European governments and Singapore filled out the total. New Age: S Korea central bank warns of surge in govt debt South Korea s government debt could surge above 100 per cent of the country s annual gross domestic product by the year 2030 from just a little more than 34 per cent now, the country s central bank said in a report. Asia s fourth-largest economy would see slower growth due to the declining pace of increases in capital and labour input, whereas government spending would surge to cover financial debts at public companies and public pension schemes, it said. The country needs to begin drawing up counter-measures from now to get better prepared for the aged society (aging population) society and prevent macroeconomic instability in advance arising from the weakening fiscal position, the Bank of Korea report said. If the government did not need to provide support for the public corporations, the report said its baseline projection was for the central government s debt to grow only modestly to 37.3 per cent of GDP by New Age: Default loans at state banks still high: BB State-run commercial banks are running with percent default loans, double the industry average, although they were corporatised about five years ago to make a turnaround, the central bank said on 22 nd April. Sonali Bank, the country's largest bank, has the highest percentage of non-performing loans at percent or Tk 5,705 crore. Janata Bank has 10.7 percent bad loans compared to the 6.12 percent industry average. The amount of default loans at the state banks is still high despite being corporatised, said Bangladesh Bank Governor Atiur Rahman. The four banks sign memorandum of understanding (MoU) every year with the central bank for developing banking operations including operation costs, availability of capital, realization of default loans, reduction of loss incurring branches and risk management. The BB also sets some targets for the banks through the agreement and reviews their achievements in every three months. Rahman said both the amount and the rate of non-performing loans of all the state banks went down in the last quarter of 2011 compared to the previous quarter. The bad loan recovery rate is also not satisfactory with the three banks apart from Janata. The banks need to hold at least 10 percent capital adequacy. The governor asked the banks to prepare and submit a comprehensive capital plan in the next two months, as the central bank is going ahead with implementing Basel-III. Rahman said the banks' implementation of the core risk management guideline has been at a marginal or fair level in most cases, which has to be improved to a satisfactory level. He also asked the banks to be more cautious about their asset liability management. Daily Star: 'Delay in LC settlement by BD banks is main barrier' Japanese investors blamed delay in settlement of letters of credit (LCs) by commercial banks of Bangladesh as the main barrier to trade and investment expansion between the two countries though both have agreed to expand bilateral trade relations. They notified the Japanese Embassy in Dhaka that a total of 2,100 LC transactions were delayed only in 2011 which raised serious concern among them. Fin. Exp: Forex reserve crosses $10b mark again The country's foreign exchange reserve (forex) crossed US$ 10 billion mark again on 23 rd April, largely because of lower import payments. The forex reserve rose to $ billion on the day from the previous working day's $9.859 billion, according to the Bangladesh Bank (BB) statistics. Earlier on March 05 this year, the country's forex reserve stood at $10.02 billion. The US dollar was quoted at Tk Tk in the inter-bank foreign exchange market Monday against Tk Tk on the previous working day, the BB data showed. The country received $ million as remittances between April 1 and April 20 from the Bangladeshi nationals who are working abroad. The Bangladeshi nationals working abroad sent US$ billion in the month of March last. The amount was $25.52 million lower than that of the previous month. In February 2012, the remittance earnings stood at $1.133 billion, the BB data showed. Fin. Exp: Spain s economy plunges into recession Spain s jobs-scarce economy plunged back into recession in the first quarter of 2012 as employment slumped even further, the Bank of Spain said. Barely two years after emerging from the last downturn, Spain slid into DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 11 of 21

12 recession again with two consecutive quarters of economic contraction, the central bank said in a report. Gross domestic product fell by an estimated 0.4-per cent in the first quarter of 2012 after a 0.3-per cent decline in the last three months of 2011, the bank said. Spain, whose unemployment rate at the end of 2011 was already the highest in the industrialized world at per cent overall and nearly 50 per cent for the young, suffered a further jobs slump. Employment fell again, sharply, with an estimated year-on-year decline of 4.0 per cent, the report said, noting also a significant decline in unit labour costs. The government forecasts the jobless rate will rise to 24.3 per cent this year as the sagging economy struggles to absorb millions of jobs destroyed in the collapse of a property boom in Spain has promised to cut its public deficit to 5.3 per cent of GDP in 2012 and just 3.0 per cent of GDP in 2013, after allowing last year s deficit to hit 8.5 per cent of GDP 2.5 percentage points over target. Desperate to meet its targets, the government has approved 27 billion euros in spending cuts and tax increases in its 2012 budget, after an earlier round of 8.9 billion euros in cuts and 6.3 billion euros in extra taxes. Analysts say the recession will make those targets even harder to reach, as tax income declines and welfare costs rise. New Age: FARM LOAN DISBURSEMENT TARGET BB to act against failed banks Bangladesh Bank will take punitive action against the commercial banks which will not be able to fulfill their annual farm loan disbursement target in the current financial year. The central bank will cut the non-disbursed farm loan amount of money of the commercial banks which is reserved as deposit money of the banks in the BB fund at the end of the FY The failed banks will get an interest of 5 per cent for their amount, a much lower rate than traditional interest rate. The central bank is going to hold a meeting on April 25 th with the private and foreign commercial banks officials regarding the issue of farm loans disbursement. The banks will be appraised of the BB stance in this regard. The BB had held another meeting with the state-owned commercials banks in this regard. According to BB data, the state-owned, private and foreign commercial banks and the specialized banks from July to March of FY have collectively disbursed Tk 9, crore, or per cent in farm loans against the annual disbursement target of Tk 13,800 crore. 24 banks in the first nine months of the current financial year had disbursed below 60 per cent farm loan of their annual target. The commercial banks have to disburse at least 2 per cent loan in the agriculture sector of their total credit distribution in a year. In the first nine months, all the PCBs and FCBs collectively disbursed per cent farm loan of their annual target. New Age: BB detects irregularities in loan sanctioning by 2 banks The Bangladesh Bank (BB) has unearthed irregularities in sanctioning of a large amount of loan by a stateowned specialized bank and a private commercial bank to a business firm in Chittagong in early last year. A special inspection team of BB investigating into the allegation early this month found that the public sector bank approved Tk 0.85 billion (85 crore) to a trading firm without following rules and regulations concerned. The specialized bank approved funded and non-funded composite loan worth Tk 0.85 billion to the firm in question and its associates on 'falsified documents'. The branch had actually recommended for approval of Tk 1.85 billion. In another irregularity, Khatunganj branch of a private commercial bank recommended its head office for approval of Tk 0.58 billion (58 crore) loan to the same firm. The financial information of the firm including its current capital review, credit risk grading and over all business performance was not followed in either of the cases in accordance with the rules and guidelines of the BB. The BB inspection team held the branch managers responsible for recommending loans on fake documents and asked the management of both the banks to take punitive action against them. The BB has also asked the banks to inform it about actions taken against their branch managers immediately. Fin. Exp: BB asks banks not to exceed consumer credit growth Bangladesh Bank (BB) has asked the commercial banks not to exceed the consumer credit growth more than its total average growth of loan portfolios. They have taken the latest measure aiming to achieve a sustainable DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 12 of 21

13 economic growth through increasing credit flow to the productive sectors by slashing loans from unproductive sectors including consumer financing. The central bank issued a circular in this connection and asked the chief executives of all 47 scheduled banks to follow the latest instruction relating to increasing credit flow to the productive sectors. The BB's latest measure came against the backdrop of the rising trend of consumer loans despite repeated attempts by the regulator to discourage loans for the same. Earlier on January 22 this year, the central bank asked the commercial banks to discourage credits to certain sectors including consumer financing. It brought about certain changes in the margin ratios of various loans to discourage lending to 'unproductive' sectors. Currently, the banks are maintaining a 70:30 loan margin ratio, instead of the existing 80:20 earlier, in the housing finance. The ratio for the car loans and all other consumer financing is 30:70 instead of the existing 50:50. Fin. Exp: IMF releases $141m installment of ECF International Monetary Fund released the first installment of $141 million of around $1 billion loan sanctioned for Bangladesh under its Extended Credit Facility. The central bank had received the first installment of the credit facility on behalf of the government on April 25 th. Earlier on April 12, the IMF approved a $987 million loan to Bangladesh under its ECF to help the country overcome macroeconomic pressures. The loan, under a three-year arrangement, was approved by the IMF executive board at its meeting in Washington DC, and will be given in seven equal installments in three years. After getting the first installment, the country s forex reserve increased slightly to $10.15 billion. Bangladesh government had sought the credit to improve the country s overall balance of payment (BoP) position as the trade deficit kept on increasing every year. Under the loan facility, the IMF had earlier set a number of conditions including increase of fuel prices, amendment to the Bank Companies Act and forming a new Vat law. New Age: Britain back in recession Britain s economy sank back into recession in the first quarter, when it contracted by 0.2 per cent amid ongoing state austerity and the eurozone debt crisis, official data showed. The British economy has now returned to a technical recession, defined as two successive quarters of contraction, after shrinking by 0.3 per cent in the previous three months, the Office for National Statistics revealed. The data confounded most analysts expectations that gross domestic product would grow by 0.1 per cent in the quarter from January to March, compared with the final quarter of last year. The ONS added in a statement that the decline in firstquarter GDP the value of all goods and services produced by the economy was driven by a poor performance by the construction and manufacturing sectors. Britain s economy had clawed its way out of a record-length recession in the third quarter of 2009 following a downturn sparked by the global financial crisis. But it has now returned to recession amid painful government spending cutbacks and fallout from the debt crisis in the neighboring eurozone, which is a key trading partner. Britain joins a number of eurozone countries in recession, including Spain, and bailed-out nations Greece, Ireland and Portugal. Overall, the 17- nation eurozone s output shrank by 0.3 per cent in the fourth quarter of last year, while recent weak data has sparked deep worries that the region is also back in recession. Highlighting the extent of Britain s debt strains, official data showed public sector net debt as a percentage of GDP excluding the cost of bank bailouts hit a record high 66 per cent in March. Britain s total debt stands at trillion (1.25 trillion euros, $1.65 trillion), the ONS had revealed. New Age: IMF cautions central bank on new banks, economic stress "The central bank should enforce stricter licensing criteria in considering any application for a new bank," said David Cowen, IMF mission chief for Bangladesh, Asia and Pacific Department. Bangladesh Bank should ensure that it has the resources it needs to properly supervise and regulate all the banks, including possible new banks on the list, he said. The central bank should also ensure that the liquidity conditions are supportive in allowing new entrants into the market. Recently, the central bank has granted permissions to set up nine banks in the country. At present, 47 public, private and foreign banks are already operational in the country, although only about 8 percent of the population is covered by financial institutions. Daily Star: DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 13 of 21

14 Increase share supply to market: top bankers Top leaders of the Association of Bankers Bangladesh (ABB) on 26 th April said the supply of new shares to the market needs to be increased to meet demand for good stocks. The chairman of ABB said a supply of new shares is important for the market to meet investors' demand. The banks are investing in the market for the development of the market. Daily Star: No of SCB losing branches down Number of loss-making branches of four state-owned commercial banks (SCBs) declined significantly in the past one year, according to recent data of Bangladesh Bank (BB) reports. The data shows a total of 156 branches of the four commercial banks - Sonali, Janata, Agrani and Rupali - became profitable in the past one year. The four banks had 290 loss-making branches in 2010, which came down to 134 at the end of Besides skill development and improved management, the losing branches became profitable on the measures including better management of deposit and advances, steady inflow of remittance and increase of purchasing power of people in general. Among the four commercial banks, Rupali Bank and Agrani Bank achieved most in turning their losing branches into profitable ones. Rupali Bank brought down its loss-making branches to only two last year from 22 in 2010 when Agrani Bank made 71 branches profitable out of its 80 losing branches a year ago. During the period, Sonali Bank cut the number of its losing branches to 65 from 90 and Janata Bank slashed the number to 58 from 98. Fin. Exp: Bangladesh bank Circulars during April, 2012 Circular Number Date Subject ACFID Circular Letter No /04/12 Disbursement of Agricultural Credit in Apiculture BRPD Circular Letter No /04/12 Rate of Interest/Profit on Fixed/Term Deposit DFIM Circular Letter No /04/12 Financial Institutions remain closed on the occasion of "Buddha Purnima" FEPD Circular No /04/12 Term lending in Taka to foreign owned/ controlled companies BRPD Circular No /04/12 Increase in Credit flow in productive sector DOS Circular Letter No /04/12 Bank Holiday on "Buddha Purnima (Baishakhi Purnima) " Source: BB website Information on Economy Amount Previous year s/ month s Position 1. Foreign Trade: Million US$ Million US$ a. Exports ( ) b. Exports (February-2012) c. Imports ( ) d. Imports (February-2012) Workers Remittance (February-2012) Inflation: point to point (February-2012) Export= FOB Value, Import = CFR Value Economic Trends: April 2012 Banking Sector and Economic Information: DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 14 of 21

15 Amount (TK in Cr.) Amount (TK in Cr.) December November Bank Deposit (excluding inter bank) Bank Credit (excluding inter bank) Money Supply a. Currency Outside Banks b. Demand Deposit c. Deposit with BB other than DMBs d. Narrow Money (a+b+c) e. Time Deposit Broad money (d+e) Excess Reserve (Liquidity) Weighted average rate of Deposits of Schedule Banks(Quarterly) Weighted average rate of Advances of Schedule Banks(Quarterly) Ratio of DMBs Credit to Deposits (%) DMBs Total Assets/Liabilities F.E. Reserve (million $US ) Cash Base of the Economy Narrow Money (M1) = Currency outside Banks+ Demand Deposits +Deposit with Bangladesh Bank Broad Money (M2) = M1 + Time Deposit DMBs = Deposit Money Banks Cash Base of the Economy = Currency in Circulation+ Balances with Bangladesh Bank Monthly Economic Trends: April 2012 (p)= Provisional Academic Activities in April, 2012: DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 15 of 21

16 I. A Three week long Foundation Course for Officers Grade-II was inaugurated by Mr. Mati-ul- Hasan, Deputy Managing Director (Business) of the Bank on April 01, 2012 at IFIC Bank Training Institute at Chamber Building 8 th floor, , Motijheel C/A., Dhaka. 29 Officers Grade-II working at various desks at the Branches and Head Office attended the course. It may be mentioned here that, it was the 5 th programme of IFIC Bank Training Institute in the year II. A one day Workshop on Training For Direct Sales Team of Retail Banking was held on April 01, 2012 at IFIC Bank Training Institute at Chamber Building 8 th floor, , Motijheel C/A., Dhaka during the opening session Mr. Dipankar Das, First Asstt. Vice President & Head of Liability-New Acquisition- Retail Banking Division present and contributed in the topic. 35 Sales Agent of the Bank attended the workshop. It may be mentioned here that, it was the 6 th programme of IFIC Bank Training Institute in the year III. A day long Dialogue meeting with "R.M. along with BAMLCO of Dhaka City & Adjacent area branches was inaugurated by Mr. Syed Zahidul Islam, SEVP & CAMLCO, of the Bank on April 07, 2012 at IFIC Bank Training Institute at Chamber Building 8 th floor, , Motijheel C/A., Dhaka. 82 Executives & Officers of the Bank working at Head Office and different branches attended the Dialogue. It may be mentioned here that, it was the 7 th programme of IFIC Bank Training Institute in the year IV. A half day Training Workshop For Direct Sales Team of Retail Banking was held on April 07, 2012 at IFIC Bank Training Institute at Chamber Building 8 th floor, , Motijheel C/A., Dhaka during the opening session Mr. Dipankar Das, First Asstt. Vice President & Head of Liability-New Acquisition- Retail Banking Division present and contributed in the topic. 75 Sales Agent of the Bank attended the workshop. It may be mentioned here that, it was the 8 th programme of IFIC Bank Training Institute in the year V. A half day Training Workshop For Direct Sales Team of Retail Banking was held on April 09, 2012 at IFIC Bank Training Institute at Chamber Building 8 th floor, , Motijheel C/A., Dhaka during the opening session Mr. Dipankar Das, First Asstt. Vice President & Head of Liability-New Acquisition- Retail Banking Division present and contributed in the topic. 35 Sales Agent of the Bank attended the workshop. It may be mentioned here that, it was the 9 th programme of IFIC Bank Training Institute in the year VI. VII. A one day long Workshop on Inward Foreign Remittance & Opening of Foreign Currency A/Cs was inaugurated by Mr. Mati-ul-Hasan, The Deputy Managing Director (Business), of the Bank on April 21, 2012 at IFIC Bank Training Institute at Chamber Building 8 th floor, , Motijheel C/A., Dhaka 22 Officers working at different branches has attended the workshop. It may be mentioned here that, it was the 10 th programme of IFIC Bank Academy in the year A half day Presentation of Variance Analysis was held on April 16, 2012 at IFIC Bank Training Institute at Chamber Building 8 th floor, , Motijheel C/A., Dhaka during the opening session Mr. Kazi Saifuddin Ahmed, Senior Vice President & Head of Branch Distribution present and contributed in the topic. 54 Executives & Officers of the Bank attended the Presentation. It may be mentioned here that, it was the 12 th programme of IFIC Bank Training Institute in the year VIII. A half day Training Workshop For Direct Sales Team of Retail Banking was held on April 24, 2012 at IFIC Bank Training Institute at Chamber Building 8 th floor, , Motijheel C/A., Dhaka during the opening session Mr. Dipankar Das, First Asstt. Vice President & Head of Liability-New Acquisition- Retail Banking Division present and contributed in the topic. 65 Sales Agent of the Bank attended the workshop. It may be mentioned here that, it was the 13 th programme of IFIC Bank Training Institute in the year IX. A half day Workshop on Training Workshop For Direct Sales Team of Retail Banking was held DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 16 of 21

17 on April 25, 2012 at IFIC Bank Training Institute at Chamber Building 8 th floor, , Motijheel C/A., Dhaka during the opening session Mr. Dipankar Das, First Asstt. Vice President & Head of Liability-New Acquisition- Retail Banking Division present and contributed in the topic. 55 Sales Agent of the Bank attended the workshop. It may be mentioned here that, it was the 14 th programme of IFIC Bank Training Institute in the year X. A half day Workshop on Training Workshop For Direct Sales Team of Retail Banking was held on April 26, 2012 at IFIC Bank Training Institute at Chamber Building 8 th floor, , Motijheel C/A., Dhaka during the opening session Mr. Dipankar Das, First Asstt. Vice President & Head of Liability-New Acquisition- Retail Banking Division present and contributed in the topic. 60 Sales Agent of the Bank attended the workshop. It may be mentioned here that, it was the 15 th programme of IFIC Bank Training Institute in the year Readers please: What is the amount of loan sanctioned recently by International Monetary Fund (IMF) for Bangladesh under its Extended Credit Facility? Match our answer with yours: Knowledge Update: 159 Answer: The total operating profits of all commercial banks in Bangladesh stood at Tk billion by the end of December 31,2011as per BB data. Team Members A. K. Mojibur Rahman, FAVP Jayanta Sutradhar, OG-I Barni Saha, OG I IT CORNER Basics of IT DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 17 of 21

18 Snapshot-4 Contributed by: Biprajit Saha, AVP, IT Division National Payment Switch (NPS) Bangladesh Bank (BB) is going to introduce National Payment Switch to strengthen electronic payment system of the country. Bangladesh Bank has already taken initiatives to establish National Payment Switch (NPS) in order to facilitate inter-bank electronic payments originating from different delivery channels e.g. Automated Teller Machines (ATM), Point of Sales (POS), Internet, Mobile Applications, etc. The main objective of NPS is to create a common platform among the existing shared switches already built-up by different private sector operators. NPS will facilitate the expansion of the card based payment networks substantially and promote e-commerce throughout the country. Online payment of Government dues using cards, mobile and internet will greatly be enhanced using NPS. National Payment Switch is one of the key considerations in National ICT Policy BB with the financial support from World Bank is implementing this initiative under Central Bank Strengthening Project (CBSP). For technological assistance the central bank has signed a deal with Singapore-based Infotech Global Pvt. Ltd. on January 26, Department of Currency Management and Payment Systems of BB in a circular issued to Chief Executive Officers and/or Managing Directors of all commercial banks informed that NPS would act as a mother switch and would gradually connect all the child switches owned or shared by the scheduled banks in the country. The circular said that the services of child switches, which are automated teller machines, point of sale, electronic commerce, internet banking, mobile banking and other online related banking services offered by banks, would be brought onto a common platform of the NPS under the Central Bank Strengthening Project. NPS will support transactions made through cards or account number (direct debit/credit), clear and settle these electronic transactions through the settlement accounts of all the scheduled banks maintained with Bangladesh Bank. Besides, NPS will have interfaces with all the major international payment technology company like VISA, MasterCard and American Express etc. so that the banks will be able to send the transactions originating from those international branded cards through National Payment Switch. NPS will also reduce the charges which the Banks would have to pay to international payment Settlement Company for off-us and remote on-us card transactions. BB said that they strongly believe NPS would help to grow the electronic payment infrastructure in Bangladesh, facilitate electronic commerce and thereby reduce dependence on cash transactions substantially. Revisiting Basics DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 18 of 21

19 INCOTERMS 2010 The Incoterms rules or International Commercial terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) widely used in international commercial transactions. A series of three-letter trade terms related to common sales practices, the Incoterms rules are intended primarily to clearly communicate the tasks, costs and risks associated with the transportation and delivery of goods. The Incoterms rules are accepted by governments, legal authorities and practitioners worldwide for the interpretation of most commonly used terms in international trade. They are intended to reduce or remove altogether uncertainties arising from different interpretation of the rules in different countries. The Incoterms rules began development in 1921 with the forming of the idea by the International Chamber of Commerce. In 1936, the first set of the Incoterms rules was published. The first set remained in use for almost 20 years before the second publication in Additional amendments and expansions followed in 1967, 1976, 1980, 1990 and The eighth and current version of the Incoterms rules Incoterms 2010 was published on January 1, The eighth published set of pre-defined terms, Incoterms 2010 defines 11 rules, reducing the 13 used in Incoterms 2000 by introducing two new rules. Delivered at Terminal", DAT; "Delivered at Place", DAP that replace four rules of the prior version "Delivered at Frontier", DAF; "Delivered Ex Ship", DES; "Delivered Ex Quay", DEQ; "Delivered Duty Unpaid", DDU. In the prior version, the rules were divided into four categories, but the 11 pre-defined terms of Incoterms 2010 are subdivided into two categories based only on method of delivery. The larger group of seven rules applies regardless of the method of transport, with the smaller group of four being applicable only to sales that solely involve transportation over water. Purpose of Incoterms Main task of Incoterms is to define the sharing of costs and transfer of risk or damage over the goods, up to an agreed place To avoid misunderstanding and disputes among the parties over the sharing of costs and transfer of risk or damage over the goods Users of Incoterms: Buyers and Sellers, directly And indirectly o Banks o Insurers o Carriers/Forwarding Agents Use by Banks Most credits will state an Incoterm This enable banks to check, to an extent, that: The documents called for in the credit are consistent with the term used The documents presented are consistent with the term used Rules for Any Mode(s) of Transport DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 19 of 21

20 EXW Ex Works: means that the seller delivers when he places the goods at the disposal of the buyer at the seller s premises or another named place (I.e. works factory, warehouse, etc.) not cleared for export and not loaded on any collecting vehicle. FCA Free Carrier: means that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. It should be noted that the chosen place of delivery has an impact on the obligations of loading and unloading the goods at that place. If delivery occurs at the seller s premises, the seller is responsible for loading. If delivery occurs at any other place, the seller is not responsible for unloading. CPT - Carriage Paid To: means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. CIP Carriage and Insurance Paid to: means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination and also pay the necessary insurance. DAT Delivered At Terminal: means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. DAP Delivered At Place: means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. DDP Delivered Duty Paid: means that the seller delivers the goods to the buyer, cleared for import, and not unloaded from any arriving means of transport at the named place of destination. Rules for Sea and Inland Waterway Transport FAS Free Alongside Ship: means that seller delivers when the goods are placed alongside the vessel at the named port of shipment This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment. FOB Free On Board: means that the seller delivers when the goods are placed on board the ship at the named port of shipment. CFR Cost and Freight: means that the seller delivers when the goods are placed on board the ship in the port of shipment. The seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. CIF Cost Insurance and Freight: means that the seller delivers when the goods are placed on board the ship in the port of shipment and also pay the necessary freight and insurance. Corporate Activities during the month April 2012 DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 20 of 21

21 IFIC Bank sponsored a live talk show IFIC Bank was a sponsor of a live talk show titled Kemon Budget Chai organized by NTV. IFIC Bank celebrated the Bangla New Year 1419 IFIC Bank celebrated the Bangla New Year 1419 in a befitting matter. The Bank distributed sweets and hand fans and also decorated Head Office and branches with banners, festoons, danglers etc. as part of the celebration. DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-04. PAGE NO. Page 21 of 21