Bangladesh banking sector reeling from political unrest

The country’s banking business has severely been affected due to political unrest and frequent shutdowns in the last few months, said top executives of some commercial banks.

They said that both collection of deposits and disbursement of loans had decreased alarmingly amid lower presence of clients in the bank due to the unrest.

The bankers said that the default loan in the banking sector might increase further if the political unrest continued in the month to come.

Eastern Bank managing director and chief executive officer Ali Reza Iftekhar told New Age on Thursday that the importers had come under severe pressure as they failed to ship their products in due time because of hartal.

For this reason, the bank liabilities of the importers have already entered in a risky position, he said.

The overdue in loan repayment has recently increased significantly as the businesspeople are now facing a crisis due to the political unrest, he said. 

Under the circumstances, the default loan in the banking will increase further in the coming months.

Iftekhar said, ‘The credit-deposit ratio in the banking industry went down massively in the last few months as the businessmen are reluctant to take loan because of the unfriendly business environment.’

According to Bangladesh Bank data till February 7, 2013, the banks’ loan-deposit ratio went down to 76.28 percent, well below the BB’s permitted level of 85 percent. It means the banks now lend Tk 76.28 against a deposit of Tk 100. Some banks’ loan disbursement has declined below Tk 70 against a Tk 100 deposit. The CDR of the EBL is 81.85 per cent.

The commercial banks are now investing in the government securities with a lower interest rate, Iftekhar said.

Pubali Bank MD and CEO Helal Ahmed Chowdhury said the frequent shutdowns had hit the transaction in the banking sector.

He said, ‘The loan repayments by the borrowers have already decreased in the banking sector due to hartal. Due to an unfriendly business environment, the entrepreneurs are not taking loan from the banks like previous scale. As a result, the loan disbursement decreased in the last few months.’

The National Bank additional managing Director Md Badiul Alam said that loan disbursement by the bank had already declined and it would decrease further in the coming days if the political turmoil persisted.

The private sector has come under serious pressure due to the hartal as the credit growth in the sector declined significantly, he said.

BB data showed that the credit growth in the private sector had slumped to 14.83 per cent in January compared to that of 17.79 per cent in the corresponding month of 2012.

Although the central bank took a slightly expansionary monetary policy for January-June of 2013 setting a credit growth target of 18.50 per cent for the period, the credit growth of 14.83 per cent in January was the lowest in last 19 months.

Alam said that the non-performing loans might also increase in the banking sector as the shutdown severely hit the businessmen.

The amount of classified or default loans in the banking sector increased by 88.67 per cent from Tk 22,644 crore in 2011 to Tk 42,723 crore in 2012, the BB data showed. (Source)

BARVIDA wants end to ‘discriminatory’ valuation method

The Bangladesh Reconditioned Vehicle Importers and Dealers Association on Thursday demanded an end to ‘discriminatory’ valuation method in calculating customs duty on import of reconditioned vehicles and sought introduction of a rational method to save the sector.

The BARVIDA also demanded that the National Board of Revenue reduce supplementary duty to 30-250 per cent from 45-500 per cent on the import of different types of reconditioned cars.

The association also sought rearrangement of the slabs of the engine capacity being measured in cc, or cubic centimetres, for imposing supplementary duty for import of used cars.

At a pre-budget discussion with the NBR, the BARVIDA proposed that the NBR accept used cars’ year-wise base value specified in the Yellow Book published from Japan for imposing customs duty on import of reconditioned vehicles.

They said that if the revenue board could not accept year-wise base value, it could set assessable value by giving 10 per cent depreciation for every year with a 25-per cent trade discount from the new price specified in the book.

The Yellow Book is published every month containing the latest depreciated prices of used cars and their prices in the manufacturing year, also called ‘new price’, they said.

BARVIDA leaders said Bangladeshi importers faced problems as the customs authorities accepted only the new price with a 35-per cent consolidated depreciation for 5 years old car in calculating duty on used cars.

‘The importers of used cars have to pay more duty than the importers of new cars pay for same model new car because of such valuation system which is totally discriminatory and unacceptable,’ said Habib Ullah Dawn, president of the association.

He said that import of reconditioned cars and revenue collection from the sector saw sharp fall because of such discrimination. 

‘In the first nine months (July-March) of the current fiscal year, we imported only 6,500 cars and paid Tk 800 crore as revenue to the government. But in 2009-2010, we imported 32,225 cars and paid Tk 3,076 crore to the NBR in revenue,’ he said.

Over the last few years, the BARVIDA had been demanding the NBR to change the valuation method but the demand has so far remained unmet, he said.

The BARVIDA alleged that low quality brand new cars from India, China, Korea and other countries flooded the market through price manipulation using the discriminatory valuation method.

Consumers are being deceived buying substandard new cars while the government is losing revenue from reconditioned car imports, they said.

Imported used cars have 90 per cent market share in the country and more than 90 per cent of such cars are imported from Japan.

The association proposed a four-tier cc slab for imposing supplementary duty in place of the existing six-tier slab in import of reconditioned car.

NBR chairman Ghulam Hussain said that the NBR would consider the proposals particularly proposals related to valuation method and rearrangement of cc slab.

NBR member Farid Uddin and former BARVIDA president Abdul Haque spoke, among others, at the meeting. (Source)

Bangladesh food inflation rises slightly in March

The overall point-to-point food inflation rose to 7.50 per cent in March from 7.45 per cent in February because of price hike of some food items, Bangladesh Bureau of Statistics said on Thursday.

The point-to-point inflation and non-food inflation decreased in the month, the data published by the BBS on the day showed.

‘The food inflation increased in March mainly due to price hike of food items such as coarse

rice, fish, meat, milk and tea,’ BBS deputy director general Mizanur Rahman told reporters at a press briefing at its conference room.

He said that the overall point-to-point inflation, calculated as per new base year of 2005-06, decreased to 7.71 per cent in March from 7.84 per cent in February while non-food inflation in the month also declined to 8.04 per cent from 8.44 per cent a month ago.

BBS officials said that the price of coarse rice rose in March due to a hike in fuel prices and it brought suffering to ordinary consumers.

According to the BBS data, the country’s demand for coarse rice constitutes 16.53 per cent of the total food consumption.

The data showed that the food inflation increased by 0.02 per cent in March compared to that of the previous month due to price hike of food items while non food inflation increased by 0.27 per cent as the price of cloth, furniture, transport, household materials, house rent and cost of education increased in March.

According to the data, the overall point-to-point inflation in the rural area witnessed a fall in March and stood at 7.16 per cent, which was 7.27 per cent in February.

The food inflation in the rural area, however, rose to 6.88 per cent in March from 6.77 per cent in February.

The non-food inflation came down to 7.66 per cent in March, while it was 8.18 per cent in February.

In the urban area, the overall inflation in March stood at 8.80 per cent, down from 8.97 per cent in February. The non food inflation also declined to 8.58 per cent in March from 8.82 per cent in February.

Replying to a question, Mizanur said works for upgrading GDP base year to 2010-11 and automation of consumer price index calculation method were going on. (Source)