🇧🇩 Banking System in Bangladesh (2 Viewers)

[Saif]

Nagad Digital Bank becomes country’s first scheduled digital bank

Bangladesh Bank gave digital bank licence to Nagad today

www.thedailystar.net

Nagad Digital Bank becomes country's first scheduled digital bank
Bangladesh Bank gave digital bank licence to Nagad today

Nagad Digital Bank PLC has become the first company to receive a digital bank licence given by the Bangladesh Bank (BB).

The BB today listed Nagad Digital as a scheduled bank, according to a notice of the banking watchdog.

"We have been advocating for a digital bank to transform Bangladesh into a smart economy through cashless transactions," Tanvir A Mishuk, founder and CEO of Nagad Ltd, said after receiving the licence at a programme at the Bangladesh Bank headquarters in Dhaka.

The board of directors of the regulator gave the final approval for Nagad on May 28 after it met the criteria mentioned in the letter of intent (LoI) handed over to it in October last year.

Nagad Digital Bank has issued 12.5 crore shares among seven sponsors. Of them, three companies -- Osiris Capital Partners (USA), Blue Haven Ventures (USA) and Finclusion Ventures Pte Ltd (Singapore) -- hold more than 10 percent shares.

The remaining four shareholders are: Zen FinTech (USA), Trupay Technologies, Farhan Karim Khan and Fintechtual Holdings Ltd, the only local shareholder.

Meanwhile in another notice, the banking regulator gave go-ahead to Osiris Capital, Blue Haven and Finclusion to hold more shares than the directors' allowed limit quoted in the country's existing banking laws.

Under the present Bank Company Act, a person, organisation, company, or member of the same family cannot hold more than 10 percent share directly or indirectly in a company.

However, the permission for Nagad came after the finance ministry extended the exemption under a provision of the Bank Company Act 1991 on March 27.​

 

[Saif]

Surge in state-owned bank bad loans warrants special attention

A SURGE in non-performing loans in state-run banks, already plagued by non-performing loans of about 25 per cent of the total outstanding loans, shows the failure of the authorities to go tough on loan defaulters. This also shows the futility of concessions that the authorities have earlier...

www.newagebd.net

Surge in state-owned bank bad loans warrants special attention
07 June, 2024, 00:00

A SURGE in non-performing loans in state-run banks, already plagued by non-performing loans of about 25 per cent of the total outstanding loans, shows the failure of the authorities to go tough on loan defaulters. This also shows the futility of concessions that the authorities have earlier given to loan defaulters. Non-performing loans in the six banks soared, as Bangladesh Bank figures show, by Tk 6,805 crore in January–March. Defaulted loans in the banks surged to Tk 85,870 crore in March, up from Tk 79,065 crore in December 2023 and Tk 60,642 crore in March 2023. Defaulted loans in the banks account for almost 60 per cent of the total default loans in the banking sector. The banks are Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Bangladesh Development Bank and BASIC Bank. The defaulted loans of Janata Bank skyrocketed to a record Tk 30,495 crore in March from Tk 25,009 crore in December 2023, accounting for 31 per cent of its total loan disbursement. Non-performing loans at Agrani Bank account for 28 per cent of its total disbursement while bad loans at Sonali and Rupali account for 14.84 per cent and 21 per cent of their respective loan disbursement. Non-performing loans at BASIC and Bangladesh Development Bank account for a staggering 63 per cent and 33.97 per cent of their total respective loan disbursement.

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[Saif]

Islamic banks' deposits, investments on wane

A crisis of confidence among clients following massive lending malpractices lands Islamic banking in Bangladesh in a quandary with liquidity crunch bedeviling their operations, according to official disclosure. From deposit to investment, and even in case of wage earners' remittance, the shariah-

thefinancialexpress.com.bd

Islamic banks' deposits, investments on wane
JUBAIR HASAN
Published :
Jun 11, 2024 00:54
Updated :
Jun 11, 2024 00:54

A crisis of confidence among clients following massive lending malpractices lands Islamic banking in Bangladesh in a quandary with liquidity crunch bedeviling their operations, according to official disclosure.

From deposit to investment, and even in case of wage earners' remittance, the shariah-based banking operations keep losing their share in recent months, which becomes a matter of concern particularly to a section of unconventional bankers.

According to Islamic banking-related statistics of Bangladesh Bank, the country's central bank, Islamic banking held 23.86 per cent of the entire deposit portfolio with the country's banking system, as of December 2023.

But, on a slide, the share came down to 23.56 per cent in January 2024 and dropped further down to 23.44 per cent in March.

In terms of investment, such unconventional banking accounted for 24.81 per cent of the total investment made through the banking system up to last December. But their share rose to 28.92 per cent in January. Thereafter, a downturn came: the shariah-based banks saw their share drop to 24.86 per cent until March 2024.

Such massive fall of share was also observed in remittance earning, considered one of the main strengths of such banking operations. The Islamic banking bagged 47.92 per cent of the country's overall remittance earnings through the formal channel. In the following month was there a turnaround with the share having increased to 51.57 per cent.

But, since then, the share has shrunk continuously to reach 41.46 per cent and 37.95 per cent in February and March respectively, according to the central bank's data.

Seeking anonymity, a BB official said there were a number of media reports regarding massive-scale loan-related irregularities in these unconventional banks which might shatter people's confidence.

"These could be a reason behind such fall in market share," the central banker said.

Managing director of an Islamic bank, who preferred not to be quoted by name, said savers started diverting their funds into the conventional banks despite their various steps to convince them.

"As a matter of fact, the growth of deposits in such banks slowed down in recent times, which is probably reflected in the data. The contribution of the shariah-based banks in terms of receiving remittance was huge even a few months ago but it has dropped remarkably in recent times.

"And it is a matter of serious concerns for us. But we're trying our best to improve the situation," he added.

A week ago, American credit-rating agency Fitch said liquidity shortages were still affecting Bangladesh's Islamic banking sector, which is more vulnerable than the conventional banks.

It said though the Islamic-banking market share is sizable in Bangladesh, it has been stagnant over the past two years.

The agency attributed the rot partly to the flight of deposits, governance issues and comparatively lax prudential requirements for Islamic banks.

However, some Islamic banks have been perfirming well in an adverse environment.​

 

[Saif]

Bank sector needs overhaul to rescue economy

Economist Ahsan H Mansur on Wednesday said that the country’s economy would collapse if a strategy for restructuring the ailing banking sector was not taken straightaway...

www.newagebd.net

Bank sector needs overhaul to rescue economy
Staff Correspondent 12 June, 2024, 22:26

Metropolitan Chamber of Commerce and Industry, Dhaka president Kamran T Ahmed welcomes economic affairs adviser to the prime minister Mashiur Rahman at a post-budget discussion organised jointly by the MCCI and the Policy Research Institute at the MCCI auditorium in the capital Dhaka on Wednesday. Economist Ahsan H Mansur and PRI chairman Zaidi Sattar, among others, were present. | Press release

Economist Ahsan H Mansur on Wednesday said that the country's economy would collapse if a strategy for restructuring the ailing banking sector was not taken straightaway.

He made the remark at a post-budget discussion organised jointly by the Metropolitan Chamber of Commerce and Industry, Dhaka and the Policy Research Institute at the MCCI auditorium in the capital Dhaka.

In the keynote, Mansur, also the executive director of the PRI, said that the financial system in Bangladesh was shrinking and the proposed budget was silent about structural reforms that the government needed to initiate in the financial sector with particular focus on the banking sector.

He said that officially the amount of non-performing loans in the banking sector increased further to Tk 1.82 trillion, but the real figure of NPL could be as high as Tk 4 trillion or 22 per cent of the total assets of the banking system.

'Some banks have NPL as high as 60 to 70 per cent of their total assets, making those banks de facto bankrupt. This cannot continue for long,' Ahsan said, adding that merger of weaker banks with stronger ones appeared to have failed due to lack of political support and deficiencies in designing the framework for consolidation.

He urged the government not to bail out bankrupt banks.

Mentioning that the Bangladesh Bank could help reduce high inflation rates by taking a few key actions, including adopting a strong monetary policy, avoiding injecting liquidity in the form of liquidity support to commercial banks and refraining from printing extra money to cover the government›s budget deficit, he said that inflation should begin to decrease within six to nine months if these steps were strictly followed.

'Taking cue from the international experience, we can expect that the inflation rate will come down to 6-5 per cent if similar developments happen in Bangladesh,' he said.

Zaidi Sattar, chairman of the PRI, discussed the 'Made in Bangladesh' initiative in the budget.

He mentioned that if policies supporting 'Made in Bangladesh' focused on selling products globally, the country›s economic growth could increase by 7-8 per cent, potentially reaching 10 per cent.

Kamran T Ahmed, president of the MCCI, said that to implement the budget properly, reformation of tax policies, automation of the tax system, reducing system losses in the overall tax collection, capacity enhancement of tax administration and adequate services delivery to the public were necessary.

'We also believe in having an interim evaluation of the budget after every three months,' he said

Mashiur Rahman, economic affairs adviser to the prime minister, said that focus should be given on increasing productivity, as well as on diversification of products and markets.

He also said, 'The government should take steps with significant investments to create more employment in the country.'

Habibullah N Karim, senior vice-president of the MCCI, among others, was present in the discussion.​

 

[Saif]

Six state banks struggle to recover written-off debts

Six state-owned commercial banks altogether recovered a nominal amount of their written-off loans against the government targets during the first quarter of the current calendar year, show Bangladesh Bank data, as a former central bank governor has accused bankers of not being serious enough abou

thefinancialexpress.com.bd

Six state banks struggle to recover written-off debts
REZAUL KARIM
Published :
Jun 15, 2024 00:06
Updated :
Jun 15, 2024 00:06

Six state-owned commercial banks altogether recovered a nominal amount of their written-off loans against the government targets during the first quarter of the current calendar year, show Bangladesh Bank data, as a former central bank governor has accused bankers of not being serious enough about loan recovery.

The six state-owned commercial banks -- all fully or majority-owned by the government -- are Sonali Bank, Bangladesh Development Bank Limited (BDBL), Basic Bank, Agrani Bank, Janata Bank and Rupali Bank.

Sonali Bank, BDBL, Basic Bank, Agrani Bank and Janata Bank only recovered 0.8 per cent, 0.15 per cent, 1.89 per cent, 3.50 per cent, and 4.57 per cent of their targets, respectively, in the January-March quarter. Rupali Bank, however, collected 53.86 per cent of its target during the first three months.

"Bankers at state-owned banks appear reluctant and lack seriousness in collecting written-off loans," said former Bangladesh Bank governor Salehuddin Ahmed. "They receive salaries and allowances regularly regardless of the deteriorating financial health of these banks."

Mr Ahmed added that borrowers from state-run banks are often influential and many fail to repay their loans. This leads to a hefty portion of disbursed loans becoming classified (non-performing) and eventually written off after a set period.

He suggested strengthening loan recovery efforts, including complying with central bank directives on the matter.

The total amount of written-off loans by state-owned commercial banks was Tk 181.17 billion in March 2024, down slightly from Tk 182.46 billion in March 2023.

The breakdown of written-off loans by bank in December 2023 was as follows: Sonali Bank over Tk 66.11 billion; Janata Bank Tk 32.42 billion; Agrani Bank Tk 39.41 billion; Rupali Bank Tk 5.67 billion; Bangladesh Development Bank Tk 13.27 billion; and Basic Bank Tk 24 billion.


Already burdened with heavy NPLs

The six banks are struggling under the weight of a large volume of non-performing loans (NPLs) -- an earlier stage of loan write-off.

Central bank data from March showed that the six state-owned commercial banks had Tk 858.70 billion in NPLs. These loans can eventually turn into bad debts, leading to a further rise in overall NPLs.

Sources in banking circles indicate that the NPL situation in the sector has been worsening for the past one and a half decades.

Banks are required to set aside provisions for a certain percentage of these loans on their balance sheets. The central bank scrutinises written-off loans quarterly.

If someone borrows money from a bank and can't pay it back, the bank considers the loan a bad debt because getting their money back seems unlikely. This is called a written-off loan. It is like removing the loan from the bank's "good stuff" list and marking it as a loss.

There are stages before a loan gets written-off. If the borrower misses payments for a while, the loan becomes non-performing. This is like a warning sign for the bank. They might try to work with the borrower to get them back on track, but if things do not improve, the loan could eventually get written-off.

The more non-performing loans a bank has, the more likely they are to write some of them off.

"While written-off loans can improve the short-term picture of a bank's balance sheet, they reduce capital base and profits in the long run. These loans also have a negative impact on a bank's business and investment activities," said a high-ranking official from the Bangladesh Bank.

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