Published On: 2009-04-09

Banks rush into deposit rate cuts

About 20 banks moved to cut the interest rates offered on fixed deposits by as much as
1.5 percentage points, a day after the central bank reset the lending rate at a maximum of
13 percent, top bankers said yesterday.
We have decided to cut the interest rate on fixed deposits in response to an order for
lending rate cuts by Bangladesh Bank (BB), said M Ehsanual Haque, managing director
of Prime Bank.
Prime Bank has reduced the interest
rate on its fixed deposits from 13
percent to 12 percent. Only last month,
the bank cut this rate by 50 basis points
to arrive at 13 percent.
For the first time after liberalisation of
interest rates in the mid-1990s, the
central bank has instructed scheduled
banks to reset the prime lending rates at
a maximum of 13 percent. Earlier, the
BB had tried to pursue banks to cut
rates.
BB wants the spread between the
lending and deposit rates to fall within
5 percent. The interest rate spread is the gap between the interest rate a bank pays on
deposits and the higher rate it charges for loans.
Sonali Bank, United Commercial Bank, Premier Bank, Jamuna Bank, Exim Bank,
Mercantile Bank, Standard Bank, National Bank, Dhaka Bank, One Bank, Southeast
Bank, NCC, Dutch Bangla Bank, Mutual Trust Bank, Trust Bank, AB Bank, Eastern
Bank and BRAC Bank are among the banks that slashed the interest rate on fixed
deposits.
BRAC Bank has reset the rate for its two-years and above but less than three years and
three years and above fixed deposit products at 11 percent, down from 13.50 percent.
Dhaka Bank set it at 11.50 percent and 11 percent respectively.
Eastern Bank cut the interest rate on fixed deposits to 11.75-12 percent from 13 percent.
United Commercial Bank reduced it to 11.50 percent from 13 percent.
State-owned Sonali Bank fixed its highest rate on fixed deposits at 9.25 percent from the
previous 10 percent.

Published On: 2009-03-15

Bankers unsure of benefit from repo rate cut

Bankers have reacted cautiously to the possible gains from the central bank's recent repo
rate cut move and said consumers will not be benefited if demand for money does not
increase.
They said demand for money is declining as the global economy is going through a tough
time and the impacts are also seen on Bangladesh as its income banks heavily on the
demands of the trouble-ridden western economies.
We have to see whether the market has any demand for credit. If the market has surplus
liquidity, the move won't benefit the customers, said Muhammad A Rumee Ali, former
deputy governor of Bangladesh Bank (BB) and now the chairman of BRAC Bank.
The central bank on Wednesday announced a cut in the repo rate, its key short-term
lending rate, by 25 basis points to 8.50 percent. The reverse repo (at which BB purchases
money from the banks) has been left unchanged at 6.75 percent.
The rate cut initiative is a contrary move from the central bank's policy stance, as it said
just two months back that the domestic credit is growing at a very high rate (27 percent)
and it needs to be controlled.
Now a senior BB official says: The rate cut will help stimulate domestic consumption
and hopefully investment demand also.
Domestic credit increased by Tk 4.8 crore or around zero percent to Tk 270,407 crore
during December 2008 compared to the previous month. However the credit went up by
Tk 21,639.20 crore or 8.70 percent during the July-December period of 2008 against an
increase of Tk 20,906 crore or 10.16 percent during the same period of the previous year.
The rise in domestic credit during the period was mainly due to an increase of credit to
the public sector by Tk 7,242.4 crore or 12.35 percent compared to the increase of Tk
5,118 crore or 9.57 percent in the same period of the previous year.
Credit to the private sector also increased by Tk14,396.8 crore or 7.57 percent during the
July-December period of 2008 compared to the increase of Tk 15,788 crore or 10.37
percent in the same period of the previous year.
Thursday, April 23, 2009

Bank profits to go down in 2009

Banks are likely to pass through a tough year in retaining the profitability and
productivity because of the falling domestic demand and commodity prices, top bankers
fear.They believe lending rate cuts and loan rescheduling without down payment would
hurt bank profits significantly.The banking industry, comprising 48 banks, heavily
depends on the garments and spinning sectors for investment. Some 4,500 woven, 1,700
knitwear and about 350 spinners sprang up with the help of banks. A severe slump in
global economy and consumption has caused an investment- sluggishness in these

industrial areas in the country. Even the existing factories do not go for any expansion,
according to senior bank officials.
We are not getting any new investment proposal this year as we had received
previously, said Kaiser A Chowdhury, president and managing director of AB Bank.AB
Bank, a 27 years old bank, had posted a 6 percent growth in advances in the first quarter
of 2009.United Commercial Bank's advance growth was within 3 percent. This bank has
been in operation for the last 26 years. It will be extremely challenging this year to
retain even the profit we earned in 2008, as the credit demand diminishes, said
Chowdhury.Of the 48 banks, 30 are private commercial banks, nine foreign and nine state
banks. Except five state-run specialised banks, all these banks were making profits riding
on booming garments and spinning sectors and a rapid spike in the prices of commodities
in 2007 and 2008. Till the third quarter of 2008, the banking sector earned huge money
from charges and commissions by financing commodity imports.Meanwhile, bank share
prices have already considerably come down. Market capitalisation of banking stocks
was Tk 35,453.12 crore at the end of March 2008, which came down to Tk 27,155.16
crore as of March 23 this year.
BB's half-yearly monetary policy
TRUE to its recent promise, the Bangladesh Bank (BB) has announced its half-yearly
monetary policy brushing aside the suggestion from the International Monetary Fund
-- IMF -- to pursue a tight monetary policy. Several weeks back, the central bank
governor had promised to prepare an 'independent' monetary policy. An IMF mission
headed by its Asia-Pacific adviser Thomas Rumbaugh, while concluding its annual
consultation in Dhaka late last week, made veiled yet strong suggestions to follow a
tight monetary policy because the credit growth in recent months had been 'too
expansionary to contain inflation'.
In its new monetary policy, the central bank has apparently opted for going along
with the expansionary credit growth with the objective of "ensuring reasonable price
stability and providing support to sustainable and high growth". This, on the face of
it, does not go in line with what the IMF considers 'important' for the Bangladesh
economy to help avert any worsening of the inflationary situation, under the given
circumstances. As expected, the new monetary policy has been welcomed by a
number of chamber bodies and economists. However, the central bank governor has
listed some downside risks, including, among others, socio-political instability,
power shortages, infrastructural bottlenecks, unfavourable near-term outlook and
high prices of oil and other commodities in the global market, for implementation of
the monetary policy. The suggestion for a restrictive monetary policy should, under
no circumstances, be considered to be ill-motivated. This is more so in view of the
present situation in which the rate of inflation remains at a high level amid risks of
its fuelling further in the event of the central bank's failure to direct credit to the
productive sectors of the economy.
There are debates, on valid and logical grounds, over how far the current inflationary
situation that the Bangladesh economy faces, in tandem with other low-income
developing economies, is related to demand-driven conditions or supply-related

constraints, or a combination of both. But there is a strong feeling particularly among

the businesses in this country that the current rate of inflation is not a demand-driven
one and external factors, more than domestic ones, have been contributing to it.
Soaring prices of oil and other commodities, including food, have been largely
responsible for high inflation in this country, as in many others. What is particularly
more worrying here is that there has been a slowdown in economic activities in the
country for the past one year, leading to the creation of a fewer number of jobs. For
instance, the industrial sector that achieved an impressive growth of nearly 10 per
cent, the highest ever in the country's history, in the fiscal 2006-07, registered a
lower growth rate of 6.87 per cent. The services sector which was making impressive
gains in recent years also recorded a lower growth in the last fiscal than that of the
previous year.
Monday, February 2, 2009
BB monetary policy statement and economic outlook
The Monetary Policy Statement (MPS) coming out of Bangladesh Bank (BB) last week
presents an upbeat outlook for the Bangladesh economy in the near term. It confirms,
based on the latest available data, that the economy stood strong during the first half
of fiscal 2008-09, barring some weakness in the export of non-RMG products like
jute and jute goods, leather, and electronics. However, it cautions that a clear picture
of the growth outlook for the entire fiscal year (FY) 2008-09 cannot be had until we
have seen the post-Christmas export trends to North America and Europe, which will
become known in February-March FY09. For the time being, the central bank is
staying with the projected gross domestic product (GDP) growth rate of 6.5 per cent
for FY09. It could be revised to 6.0 per cent if there is a significant slowdown of
exports in the second half of the current fiscal.
In light of the global financial meltdown which has wreaked havoc on so many of the
developed countries, now experiencing a period of recession, this generally upbeat
assessment of the Bangladesh economy might come as a surprise to many. But the
central bank has clearly done its homework and its assessment is based on economic
facts which reveal underlying strength and resilience of the Bangladesh economy. It
acknowledges that there is some uncertainty with regard to the second half of FY09.
BB is entrusted with the role of achieving rapid sustainable output growth with
tolerable level of price inflation. In this role it has been given complete command
over monetary and exchange rate policies, under a recent amendment to the
Bangladesh Bank Order 1972. Fiscal policy remains the realm of the Ministry of
Finance. As long as the fiscal house is in order -- which is the case -- monetary
policy independence can be meaningful and effective. BB's prudent handling of
monetary and exchange rate policies thus far, and bank supervision in the matter of
enforcing capital control, paid the ultimate dividend in that the Bangladesh economy
could escape literally unscathed from the global financial meltdown that has not
spared our South Asian neighbours, India and Pakistan.
BB has been trying to accommodate adequate credit growth in order to support the
targeted GDP growth of 6.5 per cent with inflation at 9.0 per cent . The non-

inflationary principle here is to keep money supply (M2) or broad money growth in
line with growth of nominal GDP (real GDP growth plus deflator). This is where BB
observed rightly that broad money and credit growth, at over 20 per cent, have
outstripped the expected rate of nominal GDP growth of around 16 per cent , a rate
that is declining with fall in inflation.

Hence, two curbs have been applied to slow down the pace of private credit growth,
which clocked 24 per cent in November. BB has lately insisted that commercial
banks strictly maintain their cash reserve ratio (CRR) of 5.0 per cent of demand and
time deposits. This is expected to have a modest impact on credit expansion.
Banks asked to reschedule poultry loans without down-payment
The central bank has asked eight state-owned commercial banks and financial institutions
to reschedule classified loans outstanding with the poultry farmers without any down
payment.
The banks and financial institutions have been instructed that the poultry sector loans
will be treated as agricultural sub-sector credit instead of commercial loans.
The Bangladesh Poultry Industries Association (BPIA) welcomed the BB's latest
moves, saying that measure will greatly help the bird-flu stricken poultry sector.
The Bangladesh Bank (BB) issued a circular in this connection Monday and told the
managing directors of state-owned banks and financial institutions to follow the
instructions properly in order to help revive the recent bird-flu affected poultry
sector.
"We've taken the measure for the bird flu-hit poultry farms to facilitate their
rehabilitation," a BB senior official told the FE on the day after issuing the circular.
He also said the interest rates on lending in the poultry sector will come down as the
sector has been recognized as an agricultural sub-sector instead of commercial.
Under the new provisions, the interest rates on lending in the poultry sector will
come down to 8-11 per cent from the existing 13-14 per cent, the market operators
said.
"The instruction comes into effect immediately and would continue until the next
order is issued," the central bank said in its circular.
Besides, the BB asked the banks to provide such facilities to the owners of affected
poultry farms without any harassment through proper through monitoring, the central
bank official said.
The eight state-owned banks and financial institutions are: Sonali Bank Limited,
Janata Bank Limited, Agrani Bank Limited, Rupali Bank Limited, Bangladesh Krishi
Bank (BKB), Rajshahi Krishi Unnayan Bank (RAKUB), Bangladesh Rural
Development Board (BRDB) and Bangladesh Samabaya Bank Limited (BSBL).
"We want re-financing facility for reviving the affected poultry farms across the
country," BPIA President Syed Abu Siddique told the FE, adding that nearly 40 per

cent of the country's 150,000 poultry farms have already closed down following the
outbreak of bird flu, leaving around 2.0 million people jobless.
Tue, Apr 7th, 2009

BB caps lending rate at 13pc

Dhaka, Apr 7 (bdnews24.com) The central bank has asked banks to cut lending rates to
a maximum 13 percent except for credit cards and consumer loans to help deal with
the fallout of global financial downturn on Bangladesh's economy.
It also asked the banks to allow loans defaulted by recession-hit sectors to be
rescheduled without down payment in the next six months. "Generally, defaulters are
allowed to reschedule repayment if they make a down payment of 10 to 15 percent.
This provision will remain in force about old loans. But those affected by the current
global recession will be allowed to reschedule loans without any payment for six
months upto September," the governor said Tuesday.
"The banks will take the steps based on their relations with the customers,"
Salehuddin Ahmed told reporters after a meeting with chief executives of all
commercial banks Tuesday.
The highest interest rate for all except consumer and credit card loans is currently
14.75 percent.
"We are now facing the impact of ongoing global recession," Ahmed said. "To
compensate the loss and increase investment the banks have been asked to lower the
lending rate to 13 percent."
"In view of the crisis, we are working to bring down the rates. As part of that, the
Bangladesh Bank has lowered its rates of interest for treasury bills, repo and reverse
repo."
Mahmud K Sattar, chairman of the Association of Bankers Bangladesh, an
organisation of the bank executives, said they would try to comply with the central
bank directives.
The easing of loan rescheduling conditions for the affected sectors might also help to
deal with the aftermath of the recession, he said.
Banks have also been asked to take steps to reach remittances from expatriates at the
quickest possible time.
Sattar said," The central bank will let bother bankers know about its decisions made
in the meeting of bankers. After that, banks will start implementing those decisions.
Banks to lower maximum lending rate
Banks have agreed to a central bank proposal not to charge more than 13 per cent interest
on lending in five specific areas to help mitigate the impact of the ongoing global
economic meltdown.
The Bangladesh Bank (BB) has also decided to allow rescheduling of loans to four
affected export-oriented sectors without any down payment until September 30 this
year.
The decisions were taken at a meeting of bankers held at the conference hall of the

central bank Tuesday with BB Governor Salehuddin Ahmed in the chair.

"All banks have agreed to charge maximum 13 per cent interest on lending,
excepting credit card and consumer loans," the central bank governor told reporters
after the meeting.
The country's business community earlier requested the governor of the central bank
to take initiatives to reduce lending rates to facilitate investment.
"It's an interim measure. We'll review the revised lending rate," the BB governor
said, adding that the revised interest rate on lending would facilitate the country's
business activities.
The five areas, for which a ceiling of the interest rate on lending will be fixed, are
agriculture, term loans, working capital, housing and trade financing, BB officials
said.
In March last, the banks provided loans to large and medium scale industries at
interest rates ranging between 11 per cent and 15 per cent and to small industries
between 10 per cent and 16.50 per cent.
Interest rates on housing loans range between 11.50 per cent and 16.00 per cent and
consumer credits 10.50 per cent and 19.00 per cent.
The banks' lending rates on working capital to large and medium scale industries
range between 10.50 per cent and 16.00 per cent and for small industries between
10.50 per cent and 16.50 per cent, the BB data showed.
On March 3, 2008, the Bangladesh Association of Banks (BAB) proposed to the
central bank to reduce interest rates on industrial term loans to 14.75 per cent from
16.00 per cent and the interest rates for the production sector to 14.50 per cent from
15.50 per cent.
The central bank has relaxed the existing loan rescheduling rules as a policy support
for the four affected export-oriented industries.
"We've relaxed the existing rules allowing loan rescheduling only for specific
sectors, which are affected by the global economic crisis, without any down payment
for the next six months," the BB governor announced.
Currently, rescheduling requires 10-50 per cent down payment on the overdue loan.
The central bank has already identified four sectors - textile, frozen food, jute and
leather - for allowing such relaxation of rules on loan rescheduling on the basis of
bank-client relationship, BB officials said.
"We'll issue a circular in this connection soon," a BB senior official told the FE,
adding that the central bank took such a move to help the export-oriented sectors
through providing financial support continuously.
At the meeting, the bankers have been asked to boost investments in thrust sectors
including agriculture and small and medium enterprises (SMEs).
The meeting also discussed the overall inflow of remittances from the European
Union (EU), particularly the United Kingdom (UK), aiming to sustain the flow from
the region.
The central bank took the latest move against the backdrop of a downward trend in
flow of remittances from the UK in February last, central bank officials said.
The inflow of remittance from the UK decreased to $54.72 million in February from
$67.54 million of January while the flow of remittance from Italy came down to
$11.81 million from $16.20 million, the BB data showed.

SCBs to implement 13pc interest ceiling without deposit rate cut

The state-owned commercial banks (SCBs) have decided to implement the 13 per cent
interest ceiling on lending in five specific areas without slashing the interest rate on
deposits.
The four SCBs - Sonali, Janata, Agrani and Rupali - also have formed a four-member
committee, headed by Deputy Managing Director of Sonali Bank Limited Kazi
Faqurul Islam, to formulate a guideline on rescheduling of loans to four exportoriented sectors, affected by the global economic crisis, without any down-payment.
The decisions were taken at a meeting of the chief executives of the four SCBs, held
at the Sonali Bank Limited Thursday with its Managing Director and Chief
Executive Officer SA Chowdhury in the chair.
The five specific areas are agriculture, term loans, working capital, housing and trade
financing while the four affected sectors are textile, frozen food, jute and leather,
which the central bank has identified for allowing relaxation of rules on loan
rescheduling on the basis of bank-client relationship.
Talking to the FE, Managing Director and Chief Executive Officer of Agrani Bank
Limited Syed Abu Naser Bukhtear Ahmed said, "We'll start implementation of the 13
per cent maximum interest rate on lending in the specific areas immediately."
He also said the SCBs will reschedule loans to the four affected export-oriented
sectors in line with the central bank's advice.
On April 7 last, the Bangladesh Bank (BB) decided to allow rescheduling of loans to
the four affected sectors without any down-payment until September 30 next this
year.
"We're going to issue a circular in this connection within a coupe of days," a BB
senior official told the FE, adding that the central bank relaxed the existing loan
rescheduling rules as a policy support for the four sectors.
On the other hand, the Association of Bankers, Bangladesh (ABB) has decided to
hold a meeting of all managing directors of the private commercial banks (PCBs) on
April 15 next to discuss how to implement the 13 per cent maximum interest rate on
lending in the five specific areas.
The decision was taken at a meeting of the ABB held at its office in the city
Thursday with its Chairman K Mahmood Sattar in the chair.
"We'll sit together in the next week to discuss how to implement the latest maximum
interest rate on lending for specific areas," the ABB chairman told the FE without
elaborating.
A chief executive officer of a PCB, who is also close to the ABB, said most of the
PCBs' top executives were discussing among themselves the impact of slashing
interest rates on lending along with the future interest rate on deposits.
"We're waiting for the circular of the central bank relating to the maximum interest
rate on lending," the executive told the FE, adding that most of the top executives
have agreed to cut their interest rate on deposits to minimise the interest rate spread.
In March last, the commercial banks offered interests in the range between 5.25 per
cent and 13.50 per cent on fixed deposit schemes, while the rates for saving accounts
varies between 2.50 per cent and 8.00 per cent, the BB data show.
In the latest bankers' meeting, the commercial banks agreed to a central bank

proposal not to charge more than 13 per cent interest on lending in five specific areas
to help mitigate the impact of the ongoing global economic meltdown.
Meanwhile, the apex trade body of the country Thursday hailed the government's
latest decision to cut the lending rate of the banks.
Sharp drop in call money rate
The inter-bank call money rate dropped sharply to 1.75 per cent Tuesday due to sluggish
demand for fund in a highly liquid market.
Market operators said non acceptance of reverse repurchase agreement (repo) by the
central bank since March 25 last also contributed to the decline in call rate.
The call rate mainly ranged between 1.75 per cent and 10 per cent on the day against
Monday's range between 3.0 per cent and 11.0 per cent. But most of the deals were
made at rates between 2.0 per cent and 3.0 per cent on the day, treasury officials said.
"Market is now having more liquidity because of falling trend of import payments
and export performances," a chief executive of a private commercial bank added.
"We're using our monetary tools like reverse repo auction in line with the existing
monetary policy," an executive official of the Bangladesh Bank (BB) told the FE.
Market operators said the central withdrew Tk 2.5 billion through auction of treasury
bills on Sunday. But in the past week the central bank injected Tk 5.0 billion into the
market by holding the auction of repo against withdrawal of Tk 4.0 billion.
In the previous week from March 14 to March 19, the BB withdrew Tk 20.38 billion
against injection of Tk 29.50 billion.
On January 14 last, the central bank unveiled its second half-yearly monetary policy
aiming to achieve optimum economic growth in the current fiscal while keeping
inflationary pressures under control.
Under the existing monetary policy, credit flow to the productive sectors like
agriculture and small and medium enterprises (SMEs) will be encouraged while less
productive sectors like consumer loans will be discouraged during January-June
period of fiscal 2008-09.
Besides, the central bank slashed the interest rate on reverse repo to 6.50 per cent
from 6.75 per cent on March 1l last to offset the ongoing global financial recession
and boost fresh investment.
"Call rate recorded a declining trend Wednesday last after the central bank refrained
from accepting reverse repo," a senior treasure official of a private commercial bank
told the FE.
He also said the declining trend continued until Tuesday, which may aggravate
further if the central bank does not accept reverse repo from the commercial banks
and financial institutions."The BB should accept repo and reverse repo to keep the
country's money market stable," another treasure official of a foreign commercial
bank told the FE, adding that more banks may cut interest rate on deposits in the
upcoming months to minimise their costs of fund. In March 2009, at least eight
commercial banks decreased interest rates on deposit in the current month, while
interest rates on lending remained almost the same in the country's banking sector
The commercial banks have started slashing their interest rates on deposit in March

in line with the central bank's latest interest rate policy.

"At least five more commercial banks have already cut their interest rate on deposits,
which comes into effect in April," a senior banker said, adding that more banks plan
to reduce their interest rate on deposits in line with the BB's latest move.
BB to continue with accommodative monetary policy, says Atiur
Bangladesh Bank will pursue the present strategy and continue with the 'accommodative
monetary policy', said Atiur Rahman, the governor-designate of the central bank
Monday.
"The central bank will maintain the accommodative policy and also encourage banks
to adopt pro-poor credit policy," he said in an exclusive interview with the FE after
he was named as the chief of the Bangladesh Bank.
Dr Atiur, a noted economist and professor of the Dhaka University, replaces Dr
Salehuddin Ahmed, whose tenure expires on April 30."I will immediately sit with
central bank officials and stakeholders to set the priority targets in line with the
government policies," said Dr Atiur, who is expected to take over from Dr Ahmed on
May 3.
The banks will be given targets in lending, deposit, remittance and other areas and
the central bank will provide them with resource support to fulfill them, he said.
About high lending rate, he said the central bank will continue 'moral suasion' to
reduce the rate.About the gap between lending and deposit rates, commonly known
as spread, he said it should be rationalised. "On the one hand, entrepreneurs should
not be overburdened with lending rate and on the other the banks should also make
reasonable return on their investment," he said.
The banks should adopt some austerity measures to cut their expenses, which will
ultimately help them reduce the lending rate, he felt.The central bank will strengthen
its monitoring capacity to check any unwanted situation like the financial crisis in
thedeveloped countries, Dr Atiur said."The global crisis has surfaced because of the
failure of the central banks in the developed countries and Bangladesh Bank must not
allow the banks to engage in imprudent lending and activities and offer advance
financial products that are not suitable for the country," he said."The banks should be
prepared for Basel II accord and the central bank will guide them to have required
capital and appropriate market exposure," he added.Dr Atiur said his short-term
objective will be to face global financial crisis and long-term aim is to pursue an
'equitable growth'.
"The central bank will help implement of the recommendations put forward by the
taskforce, formed by the government, to mitigate the losses of the private sector," he
said.
"We will supplement and compliment all the government policies to achieve the
broader target," he added The demand loss in foreign countries should be offset by
creating more demand inside the country, he suggested.
Post office savings bank interest rate amended

The post office savings bank has been allowed by the government to pay interest at
compound rates instead of existing simple rate to the account holders to encourage
more investment, official sources said.
The government made the decision through an amendment of the interest rate policy
which will come into retrospective effect from July 17, 2004.
The Ministry of Finance has already issued an order in this connection, the sources
added.
Under the amendment, the investors will receive compound interest on their account
balance after every three to six months maturity period.
"The investors will receive compound interest on such account following amendment
to the policy," a senior official of the National Savings Directorate told the FE
Sunday.
He also said all kinds of misunderstanding about receiving compound interest on
such accounts has been removed after the order was issued.
Currently, investors receive interest on ordinary account maintained with the post
office savings bank at 7.50 per cent.
Dhaka rejects World banks grim forecast on economy
Dhaka, April 5 (IANS) Bangladeshs finance minister has rejected World Banks forecast
of its economy in the wake of global downturn and economists here insist that the
economy was poised for a higher growth at 5.5 percent of the Gross Domestic Product
(GDP).
I do not accept it, said Finance Minister A.M.A. Muhith when asked to comment on the
World Banks projection of 4.5 percent growth rate.Bangladesh Bank, the countrys
central bank, too rejected the WB projections. Economists maintained that indicators
were strong enough for achieving GDP growth of 5.5 percent or more in the current fiscal
year.I guess this (fiscal) years GDP growth will be around 5.5 percent, Wahiduddin
Mahmud, a professor, told The Daily Star.Bangladesh achieved more than six percent
GDP growth on an average in the past five fiscal years since 2003-04 despite political
uncertainties and natural disasters. The highest growth was 6.63 percent in 2005-06, and
next to that 6.2 percent in 2007-08.The WB, Asian Development Bank (ADB) and
International Monetary Fund have predicted a lower growth for almost every economy in
the wake of the global recession. The ADB however projected Bangladeshs GDP growth
this fiscal year at 5.6 percent, which is close to the prediction made by the countrys top
economists. The minister also raised questions on how the WB made the estimate.
Bangladesh Bank Governor Salehuddin Ahmed said no economic indicator shows that
growth would be as slow as 4.5 percent. We are hopeful of achieving six percent growth
this fiscal year, he said. Former finance minister M. Syeduzzaman said: I believe it
(GDP growth) will be between five percent and 5.5 percent.Mustafa K. Mujeri,
immediate past chief economist of the central bank, said GDP would grow by around 6
percent this year.
World Bank Supports Bangladesh in Improving Water and Sanitation
ServicesDhaka City

WASHINGTON, December 2, 2008 The World Bank today approved a US$149

million IDA credit to Bangladesh, which will support the improvement of water
supply and sanitation services to the population of Dhaka.Dhaka is one of the fastest
growing megacities in the world, and its population is expected to reach nearly 22
million by 2025, up from 12 million today. This population growth is placing serious
strains on the citys ability to provide basic water, sanitation and drainage services to
its citizens. Delivery of these services throughout Dhaka is inadequate and uneven,
but is particularly poor in slum areas.
Poor water supply, sanitation, and drainage services hurt the poorest citizens the most,
said Xian Zhu, World Bank Country Director for Bangladesh. Households in slum areas
tend to rely on more costly alternative sources and alternative providers which often pose
quality issues. This project aims to improve and expand these services to all people living
in Dhaka, especially poor people.
Dhaka Water Supply and Sanitation Project is designed to improve sustainable delivery
of storm water drainage, wastewater, and water services by the Dhaka Water Supply and
Sewerage Authority (DWASA), which has the sole responsibility of providing these
services in Dhaka. This will be achieved through rehabilitation, repair, and expansion of
the citys sewerage network and treatment plants, and installation of stormwater pumping
stations and rehabilitation of canals to help improve drainage and minimize urban
flooding. The project will also support DWASAs pilot expansion of water and sanitation
services into some of Dhakas slum areas to help increase services to the urban poor, and
finance training to improve hygiene practice in the slums.
Banks cautious over lending to recession-hit ventures
Commercial banks in the country have taken cautious approach in lending to the
commercial ventures, especially those affected by the global meltdown, bankers said
Friday.
"We are very careful in providing credit to such areas amid recession. Usually, we
suggest new entrepreneurs or those affected industrial manufacturers to wait for
some more time to get loan," Ali Reza Iftekhar, chief executive officer (CEO) of the
Eastern Bank Ltd told the FE.
Since the global economic downturn has hit the financial sector in the developed
world, the country's banks are also careful about credit disbursement to weather the
possible impact, he said.
"At this moment we are much interested to extend our financial support to the newly
emerged sectors like gas, power and telecommunications," Mr. Iftekhar said.
His bank will be able to go for normal banking when the recession will start
diminishing, he said adding: "I am very much hopeful about the recession easing
from the third quarter of 2010."The credit flow to the country's private sector has
already been affected and started shrinking since October last year against the
backdrop of the global financial crisis, central bank said. The credit growth in the
sector declined to 19.84 per cent in February from 20.94 per cent in January this
year, Bangladesh Bank statistics said.
The credit flow to the private sector has declined in the last five months because of a

'go-slow' policy adopted by the businessmen and the bankers to avoid any financial
risk against the global economic recession, a senior BB official said.
"Due to prevailing global downturn, we have taken cautious approach in lending to
protect our bank from the impact of the global economic crisis," chairman of the
Janata Bank Ltd. Suhel Ahmed Choudhury said."At this moment, we are not giving
loan to the affected sectors like jute, spinning, leather and frozen food," he said
adding: "We are advising the investors to wait for some more days to borrow from
our bank."
Syed Abu Naser Bakhtiar, CEO of the Agrani Bank Ltd. said his bank is careful
about disbursement of loan to new entrepreneurs at this time of amid the global
financial meltdown."We are not much interested to give loan to some sectors like
jute, leather, frozen foods and spinning as those have already been affected by the
meltdown," he said.
"But we are ready to lend those industrial sectors whose products have adequate
demand at home. Gas, power, IT and agro-based industry, especially the wood
processing industry, are being given loan now," Mr. Bakhtiar said.
The Bangladesh Bank (BB) said the private sector credit growth came down to 24.72
per cent in October from 26.55 per cent in September 2008.
The private sector credit growth will come down to 18.50 per cent by the end of June
this year, according to the BB's latest monetary policy, announced on January 14 last.
Call rate, dollar maintain steady level
The inter-bank call money rate remained unchanged Tuesday in a very liquid market. US
dollar was also stable against Bangladesh taka (BDT) in the inter-bank foreign
exchange market because of steady demand for the greenback, fund managers said.
The call rate in extreme range fluctuated mainly between 0.25 per cent and 10.0 per
cent maintaining the previous trading day's range.
Most deals were, however, made at rates varying between 0.25 per cent and 0.50 per
cent against the previous day's range between 0.35 per cent and 1.0 per cent
reflecting a lower pressure on liquidity, they said.
The call rate, however, rose above the main trend and moved between 7.0 per cent
and 10.0 per cent in stray deals due to borrowing of cash by some financial
institutions at high rates from inter-bank market to meet urgent needs of their clients,
fund managers said.
Dollar maintained mostly a stable nerve against taka and the exchange rate of dollar
ranged between Tk 69.02 and Tk 69.05 maintaining the previous trading day's range.
The greenback was stable in public deals and cash dollar was transacted at rates
varying between Tk 67.85 and Tk 69.64 maintaining the previous trading day's
range.

Pubali Bank to launch Islamic banking

Bangladesh Bank has permitted Pubali Bank Ltd for commencement of Islamic banking
activities abiding by Shariah rules. Pubali Bank Limited Managing Director Helal
Ahmed Chowdhury disclosed this saying Islamic banking plays a vital role in the

growing economy across the world.

Mr Chowdhury was presiding over the Managers' Conference-2009 (Dhaka Central,
Dhaka North and Dhaka South regions) of the Bank held at the bank's head office in
the city recently.
In his speech, Helal Ahmed said Pubali Bank having largest network in private sector
with its 371 branches is serving their clients for a period of 50 years with its up-todate attitude.
Bangladesh Bank has permitted 15 more branches within this year as a part of its
growth programme recently.
Among 15 branches, 2 will be opened in Dhaka city, 3 branches in other cities and
the rest 10 will be opened in the rural areas, said a press release. The branches
nominated for Islamic banking are Principal branch in Dhaka and Sylhet Stadium
branch of the bank.
He said Pubali Bank started online banking initially in 10 branches of Dhaka,
Chittagong and Sylhet. Gradually all branches will come under online system. The
managing director called upon the officials to increase overall foreign exchange
business in order to cope with the changes in the environment of the global banking
system.
Central bank to stop 28-day T-bill auction from 2009
The central bank has decided to stop auction of 28-day tenure treasury bill from fiscal
2008-09 as part of the government's new debt management strategy, officials said.
The government has already changed its debt management strategy, preferring longterm borrowing instead of short-term one, aiming to minimise the mismatch between
assets and liabilities. Under the strategy, the government will take to long term
borrowing by issuing bonds to slash cost of fund and reduce dependence on overseas
assistance.
"We will discontinue the issuance of such (short-term) treasury bill from the
beginning of the next fiscal," a senior official of the Bangladesh Bank (BB) told the
FE Tuesday.
He also said the authorities concerned took the move in line with the cash and debt
management committee's decision.
Currently, a high-powered committee on cash and debt management, headed by the
finance secretary, is working on the separation of the cash management from that of
the public debt management.Besides, there is no use of the 28-day treasury bill in the
South Asian countries including India, Pakistan and Sri Lanka, the official noted.
Currently, four treasury bills and four bonds are being transacted through auctions to
adjust the government borrowing from the banking system. The four government
bonds - 5-year, 10-year, 15-year and 20-year duration - are being traded in the
market. The other T-bills have 91-day, 182-day and 364-day maturity periods.
Earlier, the central bank dropped the two year tenure T-bill from its regular auction in
line with the cash and debt management committee's recommendation.
"The scope for short term investment will be squeezed after dropping such an
investment tool," a senior treasury official of a commercial bank told the FE.

Performance of banks stocks between October 2008 to January 2009

DURING the last quarter of 2008, the banking stocks have performed in line with
the Dhaka Stock Exchange (DSE) market index. For instance, during the last
quarter, DSE was down approximately (minus)-4%, and an equally weighted
hypothetical Banking index of 30 stocks (Banking Index) was actually down
about (minus)-1%, slightly outperforming the broader market. It is important
to note that market was up significantly in December and hence improving the
performance for the entire quarter. Both the banking sector and the DSE were
both up 10% and 13% respectively during the month of December. However, in
January we have seen material profit taking as well as renewed selling pressure
in general, especially in the banking sector driving the DSE down 5% and
banking sector down approximately 15% during the first month of the New
Year. However, this divergence is not unusual since during the month of
November the Banking Index was flat while DSE was approximately down
(minus)-10%. From past experience, the market performance is not unusual
and well within the observed range. Although DSE is somewhat isolated from
the global capital markets, it is important to note that over the same period
global markets have been in turmoil. For instance, over last 4 months, Bombay
Stock Index was down (minus)-18%, Shanghai Composite Index down (minus)4%, Ho Chi Minh Stock Index down (minus)-34%, Straits Times (Singapore)
Index down (minus)-26%, FTSE 100 down (minus)-11% and S&P500 down
(minus)-23% to note a few.
Nevertheless, it is important to note that the cumulative performance over the
last four months of a few banking stocks materially impacted the Banking
Index. Excluding these four banks over last 4 months, the Banking Index is
down (minus)-12% compared to DSE's (minus)-10%, which is basically
consistent with the market. The four banks that have underperformed the most
(over -25%) during the last four months include Bank A (-39%), Bank B (28%), Bank C (-27%), and Bank D (-27%).