Private commercial banks (PCBs) now target closed-end mutual fund flotation, a business beyond conventional banking.
At least six commercial banks have announced their interests to go for such mutual funds, which are considered risk-free investment tools in stock trading.
A closed-end fund is a collective investment scheme with a limited number of shares for a stipulated period.
Southeast Bank is the latest among the PCBs that have joined the rally, with sponsoring a Tk 100 crore mutual fund.
The bank will subscribe at least 25 percent of the "Southeast Bank 1st Mutual Fund", while the rest is to be raised through pre-IPO placement and IPO (initial public offering).
Prior to Southeast, Prime Bank, Eastern Bank, Trust Bank, IFIC Bank and Mercantile Bank disclosed their plans to float closed-end mutual funds, which are subject to approval from the Securities and Exchange Commission.
"We have moved to float mutual fund with two objectives in mind. One is to bring a new product for our capital market, and the second is creation of an alternative source of revenue earning," said Ali Reza Iftekhar, managing director of Eastern Bank Limited, pointing to the high demand for this 'risk-free investment tool' in the capital market.
A senior official of Southeast Bank said bankers are now eager to look for diversified business tools or derivatives in addition to conventional banking, to sustain competition.
"The mutual fund floatation will ultimately strengthen our balance sheet," he said.
New mutual funds means more demand for long term investment, Sheikh Mortuza Ahmed, head of merchant banking and investment division of Prime Bank, told The Daily Star recently.
"Moreover, the more mutual funds will help the market move from retailers-driven to institutional," he said, pointing to the high volatility in retailer-driven market.
As per plan, Prime Bank will sponsor a Tk 100 crore closed-end mutual fund, of which the bank will subscribe at least 20 percent. The rest 80 percent of the "Prime Bank 1st ICB Mutual Fund", a 10-yearly one, will be raised through a placement prior to IPO, or pre-IPO placement. Per unit price of the mutual fund will be Tk 10.
Mercantile Bank will also sponsor a Tk 100 crore "MBL 1st Mutual Fund", wherein the bank's stake as sponsor will be 20 percent or Tk 20 crore.
Eastern Bank last month decided to sponsor a Tk 100 crore mutual fund for the local capital market. Of the fund, the bank will subscribe Tk 20 crore as sponsor.
Another Tk 100 crore mutual fund from IFIC Bank will hit the market as per the bank's decision last month. The bank will sponsor Tk 25 crore, or 25 percent.
Trust Bank is going to sponsor a Tk 200 crore mutual fund named "Trust Bank 1st Mutual Fund", wherein the bank's stake as sponsor will be Tk 40 crore, or 20 percent.
As many as 17 mutual funds are now listed on bourses. Of them, ICB and its subsidiaries manage 13 mutual funds, AIMS Bangladesh three and BSRS one.
The Grameen Mutual Fund One: Scheme Two amounting to Tk 125 crore is the largest listed mutual fund and the ICB 2nd NRB Mutual Fund worth Tk 100 crore the second. Mutual funds take up 5.54 percent of the total market capitalization.
Source: The Daily Star, April 29, 2009
April 29, 2009
April 26, 2009
Dr. Atiur Rahman made Bangladesh Bank governor
Dr. Atiur Rahman, a former BIDS research fellow who now runs an NGO and teaches development studies at Dhaka University, would be the governor of Bangladesh Bank.
When asked to confirm, the finance minister, AMA Muhith, did not give a direct reply. "Wait until tomorrow," a smiling Muhith told bdnews24.com senior correspondent Abdur Rahim Harmachi as he left his secretariat office Sunday.
An aide to the finance minister, speaking anonymously, told bdnews24.com that Muhith had "already congratulated Atiur Rahman on his appointment".
The decision is to come just days before the incumbent governor, Salehuddin Ahmed, ends his four-year tenure on Apr 30. It would also put to rest speculation about an extension to Salehuddin's tenure in the context of the on-ongoing global recession.
Atiur Rahman, who served as a director of Bangladesh's largest Sonali Bank and then chairman of the state-owned Janata Bank, will now have to deal with monetary economics as central bank supremo.
Atiur's research focussed more on poverty, and the most acclaimed included work on char dwellers and poverty alleviation.
His appointment would create a unique situation at the central bank—the governor and all three deputy governors (DGs) coming from same class of the DU economics department.
The three DGs—Nazrul Huda, Ziual Hasan Siddiqui and Murshid Kuli Khan—and their likely boss Atiur Rahman did their Masters as students of the 1973-4 batch and actually came out in 1976.
Salehuddin, a former civil service officer, was appointed to the top job by the BNP government on May 1, 2005 when his predecessor Fakhruddin Ahmed saw out his central bank contract.
The two—both Dhaka University economics graduates—swapped their positions. Fakhruddin, who was later made head of the army-installed caretaker government in 2007, took up Salehuddin's job of managing director at Palli Karma Shayahak Foundation, the government's micro-credit lending arm.
Salehuddin had earlier served as director general of NGO Bureau before landing the PKSF job.
Source: bdnews24.com, April 26, 2009
When asked to confirm, the finance minister, AMA Muhith, did not give a direct reply. "Wait until tomorrow," a smiling Muhith told bdnews24.com senior correspondent Abdur Rahim Harmachi as he left his secretariat office Sunday.
An aide to the finance minister, speaking anonymously, told bdnews24.com that Muhith had "already congratulated Atiur Rahman on his appointment".
The decision is to come just days before the incumbent governor, Salehuddin Ahmed, ends his four-year tenure on Apr 30. It would also put to rest speculation about an extension to Salehuddin's tenure in the context of the on-ongoing global recession.
Atiur Rahman, who served as a director of Bangladesh's largest Sonali Bank and then chairman of the state-owned Janata Bank, will now have to deal with monetary economics as central bank supremo.
Atiur's research focussed more on poverty, and the most acclaimed included work on char dwellers and poverty alleviation.
His appointment would create a unique situation at the central bank—the governor and all three deputy governors (DGs) coming from same class of the DU economics department.
The three DGs—Nazrul Huda, Ziual Hasan Siddiqui and Murshid Kuli Khan—and their likely boss Atiur Rahman did their Masters as students of the 1973-4 batch and actually came out in 1976.
Salehuddin, a former civil service officer, was appointed to the top job by the BNP government on May 1, 2005 when his predecessor Fakhruddin Ahmed saw out his central bank contract.
The two—both Dhaka University economics graduates—swapped their positions. Fakhruddin, who was later made head of the army-installed caretaker government in 2007, took up Salehuddin's job of managing director at Palli Karma Shayahak Foundation, the government's micro-credit lending arm.
Salehuddin had earlier served as director general of NGO Bureau before landing the PKSF job.
Source: bdnews24.com, April 26, 2009
April 22, 2009
Private Banks cap Deposit Rate at 10%
Private commercial banks (PCBs) have capped the interest rate for fixed deposit at 10 percent following the central bank's order to fix the lending rate at a maximum 13 percent, bankers said.
“Punitive actions will be taken if any bank offers more than 10 percent against a fixed deposit scheme,” said a top office bearer of Association of Bankers Bangladesh (ABB), a platform of PCBs' chief executive officers.
Actions include no transaction in call money market and keeping no deposit in those banks, he said.
Officials said ABB took the decision at a meeting on April 15, but did not disclose it on Bangladesh Bank's delay in issuing the lending rate cut circular. The BB issued the circular on Sunday.
Currently PCBs offer up to 13.50 percent for fixed deposits. A bank offered even 14 percent, the highest ever in the country, in May last year and fuelled an uneven competition among the banks.
In an interview with The Daily Star last week, Kaiser A Chowdhury, president and managing director of AB Bank, blamed the third generation banks for a spike in deposit rates.
“We set the highest rate for our three-month fixed deposit scheme at 10 percent yesterday,” said Shahjahan Bhuiyan, managing director of United Commercial Bank. The previous rate was 13 percent, he added.
The rate would be 9.75 percent for six-month scheme and 9.50 percent for one year and above, Bhuiyan, also the vice president of ABB, said.
Helal Ahmed Chowdhury, managing director of Pubali Bank, also admitted the cap of the fixed deposit rate at 10 percent.
Chowdhury however hailed the BB for allowing commercial banks to change the lending and deposit rates more than once in a month. Earlier banks could change the rates once in a month.
The government and the BB had long been asking the private banks to reduce the spread by cutting the lending rate, which was at least 14.75 percent depending on the banks. Finally the central bank forced these banks to charge a maximum 13 percent for lending to help private sector offset the impacts of global recession.
Source: The Daily Star, April 22, 2009
“Punitive actions will be taken if any bank offers more than 10 percent against a fixed deposit scheme,” said a top office bearer of Association of Bankers Bangladesh (ABB), a platform of PCBs' chief executive officers.
Actions include no transaction in call money market and keeping no deposit in those banks, he said.
Officials said ABB took the decision at a meeting on April 15, but did not disclose it on Bangladesh Bank's delay in issuing the lending rate cut circular. The BB issued the circular on Sunday.
Currently PCBs offer up to 13.50 percent for fixed deposits. A bank offered even 14 percent, the highest ever in the country, in May last year and fuelled an uneven competition among the banks.
In an interview with The Daily Star last week, Kaiser A Chowdhury, president and managing director of AB Bank, blamed the third generation banks for a spike in deposit rates.
“We set the highest rate for our three-month fixed deposit scheme at 10 percent yesterday,” said Shahjahan Bhuiyan, managing director of United Commercial Bank. The previous rate was 13 percent, he added.
The rate would be 9.75 percent for six-month scheme and 9.50 percent for one year and above, Bhuiyan, also the vice president of ABB, said.
Helal Ahmed Chowdhury, managing director of Pubali Bank, also admitted the cap of the fixed deposit rate at 10 percent.
Chowdhury however hailed the BB for allowing commercial banks to change the lending and deposit rates more than once in a month. Earlier banks could change the rates once in a month.
The government and the BB had long been asking the private banks to reduce the spread by cutting the lending rate, which was at least 14.75 percent depending on the banks. Finally the central bank forced these banks to charge a maximum 13 percent for lending to help private sector offset the impacts of global recession.
Source: The Daily Star, April 22, 2009
April 20, 2009
BB issues lending rate at 13% notices
With the announcement of the government's stimulus package yesterday, the central bank simultaneously issued two circulars relating to limiting lending rate and loan rescheduling.
The Bangladesh Bank (BB) issued a circular asking the commercial banks to cap the lending rate except credit card and consumer loans at 13 percent to offset the fallout of global financial meltdown.
Another circular asked the banks to ease rescheduling of loans for recession-hit export sectors, such as frozen food, leather and jute goods, without any down payment.
Both the decisions would be implemented immediately and remain valid until the next order, the BB circulars said.
Finance Minister AMA Muhith yesterday unveiled the much-hyped stimulus package amounting to Tk 3,424 crore for the current fiscal year to tackle the immediate impacts of the global recession.
The BB issued both the circulars as part of the government's policy support to keep the economy vibrant amid the global financial crisis.
The circular regarding lending rate ceiling said the commercial banks charge high interest rates for productive industrial sectors, which is an impediment to the country's development.
“Lending rate cut has become urgent considering the present inflationary pressure and global economic situation,” said the circular.
So lending rate for agriculture, term loan and working capital for large and medium industries, housing and trading has been capped at maximum 13 percent, it said.
Interest rate for export credit will remain unchanged at 7 percent, the circular said.
The BB also allowed the banks to change interest rate for lending and deposit for more than once in a month. Before the circular banks could change the rate just once in a month.
In the second circular loan rescheduling has been made flexible for export-oriented sectors, such as frozen food, leather and leather goods, jute and jute goods, and textile including spinning and readymade garment.
The banks have been asked to reschedule loans for these sectors without any down payment. Earlier banks took 10 percent of outstanding loans as down payment to reschedule loans.
Announcing the stimulus package, the finance minister said the banks will take necessary measures if any other export-oriented sectors are hit by the onslaught of the global recession. The BB would look into the matter, he added.
Source: The Daily Star, April 20, 2009
The Bangladesh Bank (BB) issued a circular asking the commercial banks to cap the lending rate except credit card and consumer loans at 13 percent to offset the fallout of global financial meltdown.
Another circular asked the banks to ease rescheduling of loans for recession-hit export sectors, such as frozen food, leather and jute goods, without any down payment.
Both the decisions would be implemented immediately and remain valid until the next order, the BB circulars said.
Finance Minister AMA Muhith yesterday unveiled the much-hyped stimulus package amounting to Tk 3,424 crore for the current fiscal year to tackle the immediate impacts of the global recession.
The BB issued both the circulars as part of the government's policy support to keep the economy vibrant amid the global financial crisis.
The circular regarding lending rate ceiling said the commercial banks charge high interest rates for productive industrial sectors, which is an impediment to the country's development.
“Lending rate cut has become urgent considering the present inflationary pressure and global economic situation,” said the circular.
So lending rate for agriculture, term loan and working capital for large and medium industries, housing and trading has been capped at maximum 13 percent, it said.
Interest rate for export credit will remain unchanged at 7 percent, the circular said.
The BB also allowed the banks to change interest rate for lending and deposit for more than once in a month. Before the circular banks could change the rate just once in a month.
In the second circular loan rescheduling has been made flexible for export-oriented sectors, such as frozen food, leather and leather goods, jute and jute goods, and textile including spinning and readymade garment.
The banks have been asked to reschedule loans for these sectors without any down payment. Earlier banks took 10 percent of outstanding loans as down payment to reschedule loans.
Announcing the stimulus package, the finance minister said the banks will take necessary measures if any other export-oriented sectors are hit by the onslaught of the global recession. The BB would look into the matter, he added.
Source: The Daily Star, April 20, 2009
April 16, 2009
Collateral-free loans for SMEs at 9% interest
The Small and Medium Enterprise Foundation (SMEF) yesterday began disbursing collateral-free loans at an interest rate of 9 percent, the lowest in the country, to help promote small and medium entrepreneurs.
“The government sincerely wants to support the country's small and medium entrepreneurs. Therefore, we are constantly working to disburse loans to them at a low interest rate,” said Dilip Barua, industries minister and chairperson of SMEF.
“We are also trying to lower bank interest rates, the main obstacle to the country's industrial development. A lowered rate of interest would not only help the country's SME entrepreneurs but also the national economy,” he added.
He was speaking at a loan handover ceremony "Credit Wholesaling Pilot Programme" organised by SMEF at its office in Dhaka.
“The government has decided to disburse these loans for the manufacturing sector only, instead of the trading sector. We would like to encourage the manufacturing sector to develop the country's status as an industry-based economy,” he added.
Barua stressed modifying the Money Loan Court Act and said, “The act should have a balanced position, instead of favouring the lender. The major shortcoming of this act is that it does not favour the borrower."
In 2004, the government received a grant worth $50 million from the Asian Development Bank (ADB) to support the SME sector. Of the total grant, $30 million has been sanctioned as SME loans and $ 5 million spent on entrepreneur training programmes.
The Bangladesh Bank has sanctioned 78 percent of the Tk 500 crore Small Enterprise Fund (SEF) among the SME entrepreneurs, at a 10 percent rate of interest, said Barua.
Under the Credit Wholesaling Pilot Programme, SMEF would disburse Tk 2 crore to Midas Financing Limited and Shakti Foundation. Barua handed over a check for Tk 50 lakh to Rokia Afzal Rahman, chairman of Midas Financing Limited.
Rahman said the government should consider the SME sector as the backbone of the nation, to improve the country's economic condition.
“The SME sector should be the backbone of the country. It currently manufactures a wide range of essential products and recruits a large number of people,” she said.
“The government should have proper plans to nourish and support the sector with capital generation through collateral-free loans at lower interest rates and easy repayment conditions,” she suggested.
She emphasised raising the size of loans, which should be disbursed among a wide range of SME entrepreneurs, to encourage more people to get involved in such entrepreneurship.
She also stressed the need for professional training for the SME entrepreneurs, to make them more efficient.
Professor Momtaz Uddin Ahmed, acting managing director of SMEF, said the pilot programme would disburse the amounts as a pre-financing loan, which would help the entrepreneurs receive the loan in a short span of time.
SMEF was established in 2007 with an endowment of Tk 205 crore from the central bank.
Gazi Abdur Rashid, managing director of Midas Financing Limited, was also present.
Source: The Daily Star, April 16, 2009
“The government sincerely wants to support the country's small and medium entrepreneurs. Therefore, we are constantly working to disburse loans to them at a low interest rate,” said Dilip Barua, industries minister and chairperson of SMEF.
“We are also trying to lower bank interest rates, the main obstacle to the country's industrial development. A lowered rate of interest would not only help the country's SME entrepreneurs but also the national economy,” he added.
He was speaking at a loan handover ceremony "Credit Wholesaling Pilot Programme" organised by SMEF at its office in Dhaka.
“The government has decided to disburse these loans for the manufacturing sector only, instead of the trading sector. We would like to encourage the manufacturing sector to develop the country's status as an industry-based economy,” he added.
Barua stressed modifying the Money Loan Court Act and said, “The act should have a balanced position, instead of favouring the lender. The major shortcoming of this act is that it does not favour the borrower."
In 2004, the government received a grant worth $50 million from the Asian Development Bank (ADB) to support the SME sector. Of the total grant, $30 million has been sanctioned as SME loans and $ 5 million spent on entrepreneur training programmes.
The Bangladesh Bank has sanctioned 78 percent of the Tk 500 crore Small Enterprise Fund (SEF) among the SME entrepreneurs, at a 10 percent rate of interest, said Barua.
Under the Credit Wholesaling Pilot Programme, SMEF would disburse Tk 2 crore to Midas Financing Limited and Shakti Foundation. Barua handed over a check for Tk 50 lakh to Rokia Afzal Rahman, chairman of Midas Financing Limited.
Rahman said the government should consider the SME sector as the backbone of the nation, to improve the country's economic condition.
“The SME sector should be the backbone of the country. It currently manufactures a wide range of essential products and recruits a large number of people,” she said.
“The government should have proper plans to nourish and support the sector with capital generation through collateral-free loans at lower interest rates and easy repayment conditions,” she suggested.
She emphasised raising the size of loans, which should be disbursed among a wide range of SME entrepreneurs, to encourage more people to get involved in such entrepreneurship.
She also stressed the need for professional training for the SME entrepreneurs, to make them more efficient.
Professor Momtaz Uddin Ahmed, acting managing director of SMEF, said the pilot programme would disburse the amounts as a pre-financing loan, which would help the entrepreneurs receive the loan in a short span of time.
SMEF was established in 2007 with an endowment of Tk 205 crore from the central bank.
Gazi Abdur Rashid, managing director of Midas Financing Limited, was also present.
Source: The Daily Star, April 16, 2009
Banks go SME-focused
The banking industry has increased focus on loans to small and medium enterprises (SMEs), which have been remained ignored for years despite the sector's huge contribution to the economy, as banks would set up 139 SME service centres by this year.
Bankers believe the move would help banks cope with the declining demand from big corporate clients mainly due to the global financial turmoil.
Besides four state-owned commercial banks, nearly half a dozen private banks have planned to boost lending to the SMEs this year through setting up separate divisions, officials said.
These private banks are Prime, The City, Eastern, United Commercial and Pubali banks. BRAC Bank is the pioneer and by far the market leader in SME lending in the country.
“Prime Bank has decided to develop a quality and dedicated team this year to serve the SME clients,” said the bank's Managing Director M Ehsanul Haque.
Prime Bank has planned to more than double its SME loan portfolio to Tk 1,000 crore this year from around Tk 400 crore in 2008.
“SME financing can give a thrust to the banks at the moment when there is a declining demand from big investors,” said Helal Ahmed Chowdhury, managing director of Pubali Bank.
United Commercial Bank is also considering setting up a separate division for SME credit.
Officials said other banks including AB, Bank Asia, Dhaka, Dutch-Bangla, Islami, National and Standard banks would also boost SME credit this year.
Bangladesh's banking industry has long been ignoring the much-needed credit to the SMEs despite the sector's enormous contribution to the national economy.
Data show that industrial sector contributed around one-fourth of the country's gross domestic product worth $80 billion. Of the industrial contribution, SMEs alone account for around 90 percent.
Banks disregarded lending to the SMEs terming it an informal sector that is even unable to maintain the books of account. Higher management cost and risk have also discouraged the banks not to lend to the SMEs.
But the global financial crisis and its impacts on the local economy have made the banking industry think about giving large loans.
“SMEs are the future of Bangladesh. Although there is a high risk there, the return is better than other areas,” said AEA Muhaimen, managing director of BRAC Bank that has lent nearly Tk 8,000 crore to the SMEs since its inception in 2001.
The bankers however said the lending rate for SMEs must be higher than the corporate ones.
“Lending to SMEs at 10-12 percent is not viable,” the Prime Bank boss said.
On an average BRAC Bank lends some 8,000 SME customers annually.
“Over 90 percent of our SME loans are collateral-free. We cannot take the risk at 13 percent,” said AEA Muhaimen.
The Bangladesh Bank (BB) has recently made a highest limit of lending rate at 13 percent to help businesses survive following the impacts of the global financial crisis.
“SME loan is predominantly supervisory credit and requires more manpower to conduct supervision, monitoring and recovery works,” Helal Ahmed Chowdhury said.
Meanwhile, the BB has approved opening of 139 SME service centres by the banking sector in 2009. Last year some 88 centres were opened by different banks to help the SMEs with easy disbursement, recovery of loan and quicker delivery of remittances.
The BB also launched an SME Refinancing Scheme worth Tk 100 crore in 2004. In 2008-09 fiscal year, the fund was increased to Tk 500 crore to help the sector, which contributes more to employment generation.
Source: The Daily Star, April 16, 2009
Bankers believe the move would help banks cope with the declining demand from big corporate clients mainly due to the global financial turmoil.
Besides four state-owned commercial banks, nearly half a dozen private banks have planned to boost lending to the SMEs this year through setting up separate divisions, officials said.
These private banks are Prime, The City, Eastern, United Commercial and Pubali banks. BRAC Bank is the pioneer and by far the market leader in SME lending in the country.
“Prime Bank has decided to develop a quality and dedicated team this year to serve the SME clients,” said the bank's Managing Director M Ehsanul Haque.
Prime Bank has planned to more than double its SME loan portfolio to Tk 1,000 crore this year from around Tk 400 crore in 2008.
“SME financing can give a thrust to the banks at the moment when there is a declining demand from big investors,” said Helal Ahmed Chowdhury, managing director of Pubali Bank.
United Commercial Bank is also considering setting up a separate division for SME credit.
Officials said other banks including AB, Bank Asia, Dhaka, Dutch-Bangla, Islami, National and Standard banks would also boost SME credit this year.
Bangladesh's banking industry has long been ignoring the much-needed credit to the SMEs despite the sector's enormous contribution to the national economy.
Data show that industrial sector contributed around one-fourth of the country's gross domestic product worth $80 billion. Of the industrial contribution, SMEs alone account for around 90 percent.
Banks disregarded lending to the SMEs terming it an informal sector that is even unable to maintain the books of account. Higher management cost and risk have also discouraged the banks not to lend to the SMEs.
But the global financial crisis and its impacts on the local economy have made the banking industry think about giving large loans.
“SMEs are the future of Bangladesh. Although there is a high risk there, the return is better than other areas,” said AEA Muhaimen, managing director of BRAC Bank that has lent nearly Tk 8,000 crore to the SMEs since its inception in 2001.
The bankers however said the lending rate for SMEs must be higher than the corporate ones.
“Lending to SMEs at 10-12 percent is not viable,” the Prime Bank boss said.
On an average BRAC Bank lends some 8,000 SME customers annually.
“Over 90 percent of our SME loans are collateral-free. We cannot take the risk at 13 percent,” said AEA Muhaimen.
The Bangladesh Bank (BB) has recently made a highest limit of lending rate at 13 percent to help businesses survive following the impacts of the global financial crisis.
“SME loan is predominantly supervisory credit and requires more manpower to conduct supervision, monitoring and recovery works,” Helal Ahmed Chowdhury said.
Meanwhile, the BB has approved opening of 139 SME service centres by the banking sector in 2009. Last year some 88 centres were opened by different banks to help the SMEs with easy disbursement, recovery of loan and quicker delivery of remittances.
The BB also launched an SME Refinancing Scheme worth Tk 100 crore in 2004. In 2008-09 fiscal year, the fund was increased to Tk 500 crore to help the sector, which contributes more to employment generation.
Source: The Daily Star, April 16, 2009
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