Premier Bank evades keeping Tk 370cr in provision

A Bangladesh Bank investigation has found that Premier Bank Ltd did not keep Tk 370 crore as provision against its loans and advances including classified loans in the last year.

But the central bank without giving the bank any punishment is set to allow the bank to keep the provision by December this year, said sources in the BB.

The BB inspection team recently conducted detailed inspections at different branches on financial position of the bank till December 31, 2014 and found that the bank hid the provision shortfall.

‘Our assumption is that the bank did not keep the provision to show higher net profits and give dividends to the shareholders,’ said an official of the BB.

In its financial data, the bank had sent to central bank earlier showed there was no provision shortfall as of December 31, 2014, he said.

Every bank has to keep 20 per cent provision against their classified sub-standard loans, 50 per cent against defaulted doubtful loans, and 100 per cent provision against defaulted bad loans.

Besides, the banks have to keep provision between 0.50 per cent and 5 per cent against their regular loans and special mention category loans to ensure a sound financial health.

‘The latest financial position of the bank shows that its financial health was not good,’ said the BB official.

BB sources said that Premier Bank had applied to the central bank on March 9, 2015 to enjoy three-year period to manage its provision shortfall of Tk 370 crore on a phase-to-phase basis as it is now unable to keep the required provision due to its weak financial health.

They, however, said that it was an unusual application to enjoy extended time facility from any bank to manage the provision as every bank had to keep the provision against their standard and defaulted loans for ensuring a better financial health.

The central bank is likely to give one-year period to the bank to manage the required provision considering its weak financial condition, he said.

A BB official said that the central bank would impose embargo on Primer Bank against offering cash dividend to their shareholders due to its large amount of provision shortfall.

The central bank data showed that the provisional net profit of Premier Bank had increased to Tk 88.04 crore in 2014 from Tk 56 crore in 2013.

The banks calculate the net profit by deducting the required provision and corporate tax from the operating profit.

The operating profit of the Premier Bank stood at Tk 184.04 crore as of December 31, 2014.

The net profit of Premier Bank would convert into net loss in 2014 if it had kept the required provision.

The Premier Bank managing director Khondker Fazle Rashid told New Age on Wednesday that his bank had faced the provision shortfall of Tk 370 crore due to an increased trend in the defaulted loans.

‘Against the backdrop, we have sought three-year time from the central bank to keep the required provision. Besides, we will take a strong recovery programme to recover the defaulted loans’, he said.

He said that his bank had already recovered Tk 100 crore from Dhaka North City’s mayor aspirant Sayeed Khokon.

When asked why the bank had not showed that there was a provision shortfall to BB, Fazle Rashid said that he had recently joined the bank and referred the issue to the additional managing director Abu Hanif.

Hanif, however, said that he would not give ‘such sensitive information’.

The BB data showed that defaulted loans in the Premier Bank stood at Tk 630.51 crore as of December 31, 2014. (Source: New Age, April 2, 2015)

Bangladesh banks asked not to open LCs of unlicensed traders

Bangladesh Bank has asked banks not to open letters of credit for duty-free import of industrial raw materials under bonded warehouse system in favour of the businesspeople who do not have licence or renew them from the Customs Bond Commissionerate.

The BB on Monday issued a letter to managing directors and chief executive officers of all banks in line with directions given by the Customs Bond Commissionerate asking them (banks) to take required measures in this regard to tackle duty dodging.

A BB official told New Age on Monday that the Customs Bond Commissionerate had issued a letter to the central bank on March 25, requesting it to ensure the government revenue as some banks frequently opened LCs for the duty-free back-to-back imports in favour of some businesspeople who did not have licence.

The Customs Bond Commissionerate offered the licence for due-free raw material imports to the businesspeople who use the products to produce export-oriented goods, he said.

But, some businesspeople sell the imported raw materials in the local market without using the products to produce the export-oriented goods, the official said.

The Customs Bond Commissionerate in its letter said that it had already created a web site in which the list of the licence-holders, who are considered to enjoy the duty-free facility, was attached.

The banks should follow the web site before opening the letters of credit for the duty-free imports, the letter said.

Besides, the banks will have to issue Proceed Realisation Certificate after ensuring the export worth’s repatriation, the Customs Bond Commissionerate said.

The banks give the certificate to the exporters after they repatriate the worth of the exported products to the country, the BB official said.

Some banks, however, provide the certificate without ensuring the repatriation worth of the exported products, he said.

The Customs Bond Commissionerate earlier suspended a number of licences of the businesspeople as they were found selling the back-to-back imported-products in the local market after enjoying the duty-free facility illegally.

For this reason, the Customs Bond Commissionerate has also attached the list of businesspeople with its web site whose licences were earlier cancelled or suspended.

The central bank earlier unearthed that some persons patronised by the ruling parties had managed the licence to enjoy the duty-free import although they had not played any role in export-oriented business, the BB official said.

‘After selling the products in the local market, the persons never went for any import again meaning that they did so just to evade the duty’, he said.

The central bank will take punitive measures against the banks which will open such type of LCs to facilitate the businesspeople illegally, the central banker said. (Source: New Age, March 31, 2015)

IFIC Bank Disburses Loans to Women Entrepreneurs

IFIC Bank disbursed loans to a group of women entrepreneurs during the “Banker-Women Entrepreneurs Meet and Loan Disbursement Program-2015” held Friday at Cox’s Bazar.

As Chief Guest of the program, Governor of Bangladesh Bank Atiur Rahman handed over the cheque to the women entrepreneurs.

The program was attended, among others, by Deputy Managing Director & CFO of IFIC Bank SM Abdul Hamid and EVP & Head of SME Division TIM Rawshan Zadeed.

Earlier IFIC Bank also disbursed TK 3.5 million to women entrepreneurs in different parts of the country. (source: press release)

Bangladesh: BB launches Tk 100cr refinance scheme for new entrepreneurs

Dhaka, June 27 (New Age): Bangladesh Bank on Thursday introduced a refinance scheme worth Tk 100 crore for the new entrepreneurs to encourage self-employment.

The BB in a circular to banks and non-bank financial institutes said that the entrepreneurs, who had not accumulated any business experiences earlier, would be able to receive the loans from the refinance fund.

The maximum tenure of the loan is five years with an interest rate of 10 per cent.

The entrepreneurs will avail a grace period of six months to repay the loan, the BB circular said.

Each of the clients will get a maximum amount of Tk 10 lakh in loan without any mortgage but the banks and the NBFIs will be able to take

personal guarantee or third party guarantee from the clients.

The clients will get a maximum Tk 25 lakh from the scheme by giving mortgage to the banks and the NBFIs, the circular said.

The entrepreneurs, however, will have to arrange 20 per cent of the total costs of any project. They have to attain technical education about their proposed projects.

The entrepreneurs must hold training certificates from government and non-government institutions which are recognised by the central bank.

The BB asked the banks and the NBFIs to give priority to women entrepreneurs and projects on import alternative products, export-oriented businesses, innovative and creative enterprises and ICT related businesses in disbursing the loan under the refinance fund.

Draft finance company act allows BB to dissolve leasing company boards

Dhaka, June 24 (New Age): Bangladesh Bank will be empowered with the authority to dissolve the boards of non-bank financial institutions in a proposed Finance Company Act that has put stringent restriction on lending by the financial entities, commonly known as leasing companies. BB has drafted the Finance Company Act-2014 to place the existing Financial Institution Act-1993 to regulate the country’s leasing companies more strictly. The proposed act, now being scrutinised by finance ministry, said BB could dissolve the boards of finance companies, its chairman, directors and chief executive officer if the central bank finds any gross irregularities harmful to its depositors. The current provision lying in the FIA stipulates that BB only could fire chairman, director or CEO of any leasing company for valid ground, but not the board of such company. Both the acts, existing and the proposed ones, however, have provisions for seeking clarifications from the persons in questions, before BB applies its ultimate powers. Presently, the country has 30 leasing companies. The proposed act has put restriction on holding more than 10 per cent share of a finance company by any individuals or any company or members of a family. Restricting investment, the act said no finance company is authorised to invest more than 25 per cent of its paid-up capital in a single subsidiary organisation that belongs to the finance company concerned. The current provision under the FIA allows 50 per cent investment by a leasing company of its total paid-up capital. The number of board of directors of such finance companies will be as high as 16, according to the new act. The maximum number of directors to be appointed from a family having shares above five per cent on the finance company could be only two, while one director can be appointed from a family having less than five per cent stake in a finance company, the proposed act said. Presently, no capping on board members applies to a leasing company as the companies concerned generally decide on the numbers of their board members. The tenure of office of a director has been proposed for three years with limiting their terms for maximum two consecutive times. Any finance company director will be disqualified to become director of a bank company or other finance company simultaneously. The current provision disqualifies a leasing company director from becoming a director of an insurance company along with directors for bank and other leasing company at a time. An executive director of BB said they had finalised the draft act in consultation with different stakeholders including that of association of leasing companies. He said the current FIA has lost relevance on many counts as that was enacted more than two decades ago. The finance officials said they would submit the draft act to cabinet division next month with minor changes for approval.