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Liabilities hikes as Profits drops: CB

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The overseas branches of Bangladeshi banks are not doing well due to financial losses and rampant irregularities, which reflects on the financial condition of last year, 2021.

At the very end of the month of the previous year, overseas branches’ net profits stood at $4.30 million, which is 1pc lower than the previous year, according to the latest data from Bangladesh Bank (BB).

It stated the total liabilities of the overseas branches of local banks stood at $315.03 million at the end of 2021, which is $31.32 million higher than the previous year.

The customers’ deposits are consisting of 87.45pc of the total liabilities, said the BB data.

Almost all the overseas branches and exchange houses are incurring losses because their expenses far exceed their income, said Mohammed Nurul Amin, former chairman of the Association of Bankers, Bangladesh (ABB).

Now overseas operations are shutting down because of scams and irregularities, he added.

The customers’ deposits in overseas branches stood at $275.50 million last year, up from $223.31 million a year ago. On the other hand, loans and advances stood at $94.32 million, which is 11.76pc higher than the previous year.

Currently, three banks — Sonali, Janata and AB — have overseas banking operations with seven full-fledged branches in India and the United Arab Emirates.

However, 20 banks are providing overseas banking services for collecting foreign remittances and other activities through 25 exchange houses, seven representative offices and five subsidiary companies.

Central bank authorities told that prudent monitoring is required to ensure overseas branches’ proper compliance with the regulations imposed by the regulators of both home and host countries.

Over the past few years, Janata Bank, Sonali Bank, Agrani Bank, National Bank, Exim Bank, Pubali Bank, Prime Bank, AB Bank and Mutual Trust Bank shut down their overseas branches and exchange houses in multiple countries after suffering huge financial losses.

The National Bank shut its exchange house in the United States in February this year. The bank’s Managing Director Md Mehmood Husain said they had to do that because the exchange house incurred losses for several years.

He added, “Not just National Bank, most of the subsidiaries of other banks are also incurring losses too due to a lack of in-depth planning. However, we still have exchange houses in Malaysia, Singapore, Greece and Maldives, and they are profitable.”

Agrani Bank and Exim Bank also closed their exchange houses in Canada last year. Mehmood said, “Most of the banks opened overseas branches and exchange houses in western countries on emotion, instead of running surveys first to check the feasibility of the move.

“The lack of in-depth survey, proper planning and having no idea about the coverage area are the key reasons behind the closure of these subsidiaries.”

He added, “The overseas branches and exchange houses also needed big investments in the necessary technology to carry out business, but most of the banks did not make adequate investments for this.”

 

 

 

 

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Bank-Insurance

Banks in Industrial Areas to Open June 14-16 for Eid Payments

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To ensure timely payment of salaries and bonuses to garment industry workers before Eid-ul-Azha, the branches of banks in key industrial areas will remain open on a limited basis on June 14, 15, and 16.

The Bangladesh Bank (BB) issued a notification stating that bank branches in Dhaka metropolitan, Ashulia, Tongi, Gazipur, Savar, Bhaluka, and Narayanganj will operate on these days to facilitate financial transactions for garment sector employees.

Typically, Friday and Saturday (June 14 and 15) are weekly holidays, and Sunday (June 16) will be closed for Eid. Despite these closures, the BB has mandated that banks in industrial regions stay open to manage the disbursement of wages and bonuses and facilitate the sale of export bills.

Additionally, bank branches in Chattogram metropolitan and industrial areas will also be open to support garment workers’ payments and the processing of export bills.

The BB has instructed banks to coordinate with local authorities to ensure adequate security at the branches during this period.

Eid-ul-Azha, one of the most significant religious festivals for Muslims, will be celebrated in Bangladesh on June 17.

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Cenbank Mandates Real-Time Reporting of Willful Defaulters

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The Bangladesh Bank (BB) has issued new instructions to banks to submit data on willful defaulters to the Credit Information Bureau (CIB) database. This directive was issued on Tuesday, requiring immediate compliance from commercial banks and non-banking financial institutions (NBFIs).

In a circular released by the CIB of the central bank, banks have been instructed to report their June data in real-time starting July 1. The circular has been sent to top executives of banks for prompt execution.

This move follows an earlier initiative by the BB, outlined in a circular on March 12, aimed at identifying willful defaulters within the banking sector. The central bank also detailed actions to be taken against such defaulters.

According to the circular, any client who takes a loan anonymously and misuses it will be classified as a willful defaulter. Banks were directed to establish a ‘willful defaulter identification unit’ by April 9 to facilitate this identification process.

The circular further stipulates penalties for non-compliance. Banks that violate these conditions will face fines ranging from Tk 50 lakhs to Tk 1 crore. Continued violations will incur additional fines of Tk 1 lakh per day.

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Cenbank Raises Dollar Price to Tk 117

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The Bangladesh Bank has adjusted the dollar price to Tk117 from Tk110 by introducing the crawling peg exchange rate mechanism.

Under this new approach, the bank will buy and sell dollars with Tk117 as the mid rate.

This decision was reached during a meeting of the monetary policy committee on Wednesday, May 8th.

Additionally, the committee has opted to discontinue the SMART lending rate mechanism, allowing banks to set their lending rates based on dollar demand and supply, according to a circular issued after the meeting.

The crawling peg system permits a currency with a fixed exchange rate to fluctuate within a specified band of rates, combining features of both fixed and floating exchange rate regimes.

On May 5th, Bangladesh Bank Governor Abdur Rouf Talukder announced the adoption of a market-based interest rate and the implementation of a crawling peg system to stabilize the foreign exchange rate.

He stated that the central bank is collaborating with prominent economists and bankers to devise a contractionary monetary policy aimed at curbing inflation and restoring macroeconomic stability.

Earlier, on April 2nd, the World Bank stressed the importance of a crawling peg mechanism aligned with market-clearing exchange rates to narrow the gap between formal and informal exchange rates, as outlined in the latest Bangladesh Development Update report.

Meanwhile, the International Monetary Fund (IMF) has advocated for a market-based dollar rate. In January 2023, the IMF attached several conditions to a $4.7 billion loan facility over a three-and-a-half-year period. Bangladesh has received two installments of the loan by fulfilling nearly all conditions, except for the reserve requirement.

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