BB Set to Launch Digital Bank Nationwide: Governor
The Bangladesh Bank is gearing up to launch a digital bank in the country, as announced by Governor Abdur Rouf Talukder on Wednesday, May 24th.
Speaking as the chief guest at the first Digital Transformation Summit 2023, he highlighted the upcoming introduction of a digital bank, an online real-time credit rating system, and national debt cards. Hosted by the Association of Bankers Bangladesh Limited (ABB) under the theme “Banking on Digital Transformation,” the two-day summit is being held at Pan Pacific Sonargaon Dhaka.
Governor Abdur Rouf Talukder emphasized the pressing issues of corporate governance and non-performing loans in the banking sector. He stressed the need for cultural changes, ethical practices, and proper education of the workforce to instill good practices within the banking system. The implementation of guidelines, along with strong management and CEO involvement, is expected to address these challenges effectively.
Highlighting the achievements of the Digital Bangladesh vision, the central bank governor stated that steps are being taken towards realizing the Smart Bangladesh vision. Additionally, there is a goal to make 75% of transactions cashless. With these initiatives, the Bangladesh Bank aims to enhance the country’s banking sector and embrace the digital era.
May Remittance Declined due to Hundi
In May, Bangladesh experienced a significant decline in remittance inflows, with a drop of 10.27% compared to the same period last year. The primary reason behind this decrease was the higher exchange rate of the dollar in the open market, which tempted expatriates towards hundi, an informal cross-border money-transfer method.
As per data from the Bangladesh Bank, expatriates sent $1.69 billion through the formal banking channel in May, a decline from $1.88 billion recorded in the corresponding month of the previous year.
Bankers attribute the shortage of dollars within the country’s banking system as the driving force behind many businessmen resorting to hundi to collect dollars from foreign sources. Currently, expats receive Tk108.50 plus a 2.5% incentive when sending remittances through the formal banking channel. However, the cash dollar rate in the open market ranges between Tk111-13, while it reaches Tk115-16 in foreign markets.
A senior official at the central bank acknowledges that numerous prominent businesses have opted to collect dollars from foreign sources through hundi, bypassing the official market. This practice has consequently led to a decrease in the inflow of dollars through the formal banking channel.
Overall, the drop in remittance inflows during May highlights the influence of higher dollar rates and the allure of hundi on expatriates, resulting in a diversion from the formal banking system for money transfers.
BB ordered to reserve provisions against losses in shares and bonds
On Wednesday (May 24), Bangladesh Bank issued a directive to banks regarding the reservation of provisions against investment losses in shares, bonds, debentures, and mutual funds of listed companies.
The directive was sent to the managing directors and chief executive officers of all banks operating in the country. According to the central bank’s instructions, if the purchase price of securities, other than government securities, in terms of investment is lower than the latest market value, banks must reserve provisions equivalent to the difference between the purchase price and the latest market value.
This difference in price will be recognized as a loss in investment value. This provision requirement applies to listed shares, bonds, debentures, and mutual funds or any portfolio of funds. Additionally, provisions will be reserved separately for equity shares, bonds, debentures, and mutual funds or any portfolio of listed companies.
In addition, it has been stated that in the case of investment in non-listed equity shares, if the total value of the company decreases, banks must reserve provisions equivalent to the reduced value as a percentage of the investment ratio within the institution, through the medium of the bank. If the invested company ceases to exist or its operations are suspended or deemed non-performing, provisions must be reserved for the same amount as the investment, unless any visible operations are carried out.
Furthermore, the directive specifies that for non-convertible cumulative preference shares, if the bank does not receive the specified interest, dividends, or cash gains as per the agreement, a provision of 25% of the principal amount must be reserved at the end of the first year. For the second year, an additional 25% and a provision of 100% must be reserved if the accrued gains remain unpaid for three years.
According to the recent directive from the central bank, if the average purchase price of be-maturity mutual fund units is lower than the surrender price (the value at which units are returned to the asset management company), banks must reserve provisions equal to the amount of the difference between the average purchase price and the surrender price. In line with these guidelines, banks are required to maintain provisions on a quarterly basis and submit the provision reserve information to the Bangladesh Bank.
This directive, issued under Section 45 of the Bank Companies Act, 1991, will come into effect from June 30th.
Deceased Person Presented as Insurance Company Director, Resulting in Loan Acquisition
In a remarkable turn of events, an insurance company has been listed in the share market with the name of a deceased individual as its director.
The company has also obtained a loan from a foreign financial institution, pledging the shares of the deceased as collateral. These astonishing revelations have come to attention regarding Rupali Insurance Company Limited, a prominent player in the market. Over the past decade, the company’s management has even acknowledged the presence of the deceased individual as their director, leading to some alterations in the name associated with the position. These intriguing details have been uncovered through a financial investigation.
According to sources, the founder and managing director of Rupali Insurance, Md. Nazim Uddin Khan, who had reportedly passed away in critical condition at Dhaka’s Dhanmondi Nursing Home in May 2012, is currently being seen as the company’s director. However, it has been eleven years since Md. Nazim’s demise, and yet he continues to hold the position of director at Rupali Insurance.
It has been found that Md. Nazim Uddin Khan opened a beneficiary owner’s account (BO account) with EBL Securities Limited in 2010. The BO account number is 1201950039331363. At present, this account holds 21 lakh 15 thousand 802 shares of Rupali Insurance. However, among these shares, 18 lakh 31 thousand 864 shares are identified as being pledged to EBL Securities.
The investigation reveals that these pledged shares have been transferred to Uthara Finance Capital. The circumstances surrounding the pledge of these shares remain unclear, with no conclusive response from either EBL Securities or Rupali Insurance management. Despite the passing of Md. Nazim Uddin Khan in 2012, his wife and children wanted to take over the shares of Rupali Insurance, but the company kept delaying.
According to the report from the Central Information Bureau (CIB), it has been found that there is no loan in the name of Md. Nazim Uddin. This raises the question of who took a loan by pledging Nazim Uddin’s shares. How did Uttara Finance acquire the loan from EBL Securities? And who authorized this loan? No institution has provided satisfactory answers to these questions.
Sources reveal that following a court order, Rupali Insurance granted permission to the successors of the deceased director to claim the shares. However, the beneficiaries have not been able to claim the shares in the name of Nazim Uddin so far. Rupali Insurance, Uttara Finance, and EBL Securities have alleged that they are unable to trace the shares in question. The family of Nazim Uddin Khan sent a letter to the managing director of EBL Securities on May 18th, expressing their concerns. The letter seeks information about when the shares were pledged according to the instructions of the shareholders.
In regard to this matter, Siraj Uddin Khan Mintu, the eldest son of the late Nazim Uddin Khan, stated to Orthosongbad, “My uncle used to be the director of Rupali Insurance at one point. After my father’s demise, my aunt took care of these matters. We were unaware of these issues back then. Now, following the court order, Rupali Insurance has transferred the shares.” Upon contacting EBL Securities after obtaining the transfer, it was revealed that the shares are held in a pledged state.
However, they have not provided any information regarding why the shares are pledged. They have instructed us to request share lock removal from CDBL. Upon contacting CDBL, we were informed that this is not their responsibility but rather they suggested that we file a complaint with them.
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Interestingly, even though Nazim Uddin Khan passed away in 2012, he is still being shown as the director of Rupali Insurance in the company’s 2022 annual report, according to sources. Although Rupali Insurance only refers to him as Nazim Uddin, the annual report does not include a photo of him, despite featuring photos of other directors. Additionally, EBL Securities has allegedly replaced the photo in Nazim Uddin Khan’s BO account, as claimed by his relatives. This fact has also been verified through the investigation conducted by Orthosongbad.
Efforts to contact the Managing Director (MD) of EBL Securities, Mr. Sayadur Rahman, regarding the allegations have been unsuccessful. However, Farhad Morshed Sunny, the responsible employee of the organization, informed Orthosongbad that the account of Md. Nazim Uddin has been suspended in the BSEC (Bangladesh Securities and Exchange Commission). It was the legal heir who applied for the suspension in the BSEC. We have informed them to lift the suspension order.
According to Mr. Morshed, the client (Md. Nazim Uddin) and Rupali Insurance can provide information on how shares were held (locked). The client’s name does not match the name on the B/O account and the death certificate. Essentially, EBL Securities has no knowledge about this matter.
Farhad Morshed stated that they are not obstructing any assistance. We are obligated to comply with the High Court’s order. However, due to the account suspension, we are unable to provide clarification regarding the shares. Nevertheless, the family of Nazim Uddin claims that they did not submit any application to suspend the account.
To know more, the Managing Director of Uttara Finance Capital Management, Mohammad Shahinur Rahman, stated that it is difficult to speculate on the reasons for the share lock. Shares are typically locked as collateral against loans. Even though we have the share lock, we cannot specify the reason behind it. The primary company can provide that information.
Mohammad Atiqur Rahman, the Secretary of Rupali Insurance Company, informed Orthosongbad that Mr. Nazim Uddin Khan was the Managing Director until 2022, but he is no longer with us. We have no knowledge of his death in 2012. Hence, he continued to be on the board for all these years. Regarding the selection of a Managing Director even after a person’s demise, he stated that it is a matter for the management. I do not wish to discuss these matters over the phone.
In a perplexing turn of events, the question of how a debt was taken out in 2017 when the person had passed away in 2012 remains unanswered. The company secretary stated that he had no knowledge of such a matter and it is only known to those who hold the shares. It is necessary to inquire the company to gather information. However, I was not the company secretary at that time in Rupali Insurance. Nevertheless, we have granted permission for the transfer of shares to the successors of Nazim Uddin Khan. Due to the matter of share transfer being subject to the approval of the board, there has been some delay.
According to Al-Amin, an assistant professor in the Department of Accounting and Information at Dhaka University and a financial analyst, if such incidents occur, they are undoubtedly unpredictable, chaotic, and irregular. It is impossible to take any action without the consent of the board responsible for shareholding and pleas. If such incidents occur, the entire board is held accountable. The reason behind the absence of a board member during a board meeting also needs to be explained. It is not possible to keep the deceased person on the board without the decision of the board. Therefore, the entire board is responsive in this regard.
To know more about this matter, Md. Rezaul Karim, the spokesperson and managing director of the Bangladesh Securities and Exchange Commission (BSEC), who stated that he is unaware of the issue. The SRMIC Department of the BSEC is overseeing this matter. If a specific complaint is received, the commission will take legal action against the culprits.
It is worth mentioning that as per Section 377 of the Succession Act of 1957, the High Court ordered to allocate shares of Rupali Insurance to the wife and children of Nazim Uddin Khan. According to the High Court’s directive, his wife, Haji Rokeya Begum, will receive 2 lakh 64 thousand 475 shares. His two sons will receive 4 lakh 62 thousand 831 shares in total, and the four daughters, Rahima Zaman, Fahima Wahid, Shamima Namij, and Sayma Nazim, will each receive 2 lakh 31 thousand 415 shares.
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