BB Bank reduced interest rate of EDF Loan from 2.00% to 1.75% to boost export amid Corona Pandemic

Bangladesh Bank, the central bank of Bangladesh has reduced interest rates on loans under the Export Development Fund (EDF) from 2.00% to 1.75% to help exporters to recover from pandemic-related disruptions. Such an interest rate on loans under the EDF will continue until March 31, 2021, according to a notification, issued by the Bangladesh Bank (BB) on 28.10.2020.

The interest rate for Authorised dealer (AD) banks was also reduced from 1.00% to 0.75% to get the EDF fund i.e. Authorised dealer’s spread will remain unchanged.

Besides, The central bank has enhanced the size of the EDF fund from $3.5 billion to $5.00 billion.  EDF financing is allowed for input procurements against import and procurement in foreign exchange by manufacturers producing final output for direct and indirect exports.

The EDF loans are payable by the banks upon receipt of export proceeds within 180 days from the date of disbursement, extendable by the BB up to 270 days in case of a longer period for the repatriation of export income.

 

Bank Rate reduced to 4% p.a.

Bangladesh bank has reduced Bank Rate from 5% p.a. to 4% p.a. In this regard, Bangladesh Bank issued a circular on 29th July 2020.

Banks started reducing salary and cutting job due to effect of Covid-19

Corona virus hits profitability of Banking sector severely even some banks could not bear administrative expenses. As a result banks has started reduction of employees salary and cutting jobs as well. We have news that AB Bank Ltd. has already reduced salary of the employee by 3% to 5% and Mutual Trust Bank also thinking to do the same. 

Probable Corona Virus effect on Banks/Financial Institutions

1. Reduction of profit margin even some medium and week bank may start incurring loss

2. Sharp increase of Non Performing Loan as Corona Virus hits every sector of the business which leads borrowers non capable to serve the debt.

3. Banks/Financial Institution will face difficulties to bear operational expenses and will be compelled to reduce salary of the employees even may reduce employee as well.

4. May face liquidity crisis in near future.

Bank Job prospects in Bangladesh / Banking as a Career, key factors to consider

When anyone wants to do a Bank job or want to develop his career in banking and financial industries following factors must to consider:

What is Bank: Before choosing a bank job one should know about the bank. Simply, Bank is a financial intermediary between a surplus unit of fund and a deficit unit of fund in the society i.e. it take/borrow money from some people and lends money to others. Main profit of the Conventional Bank generate from spread between lending interest income and deposit interest expenses. Besides, modern Banks doing some other fee based activities like issuing LCs/Guarantees, custodian and security service. 

In Bangladesh there are two types of Banks operating: 

    1. Islamic Sharia Based Banking System 

    2. Conventional Interest Based Banking System

Educational Requirements for Bank Job in Bangladesh:

Graduation/posts graduation degree from any reputed university is generally asking educational requirement for having a bank job. But, for entering accelerated career as Management Trainee of relevant post applicant must have BBA/MBA degree from top rated university of Bangladesh and have to face several steps of examination like written examination and viva voices.

Good things of a Bank Job:

Handsome initial salary: Banks are generally providing handsome amount of salary from starting. Besides, Banks also provide incentives on profit to the employee based on the business performance.

Good Corporate Governance: In Bangladesh Banking sector is strictly regulated by the Bangladesh Bank, the Central Bank of Bangladesh. As such, compare to other industry corporate governance better,

Excellent Work Environment: Work environment in banking industry is very good. well skilled personnel, Air Conditioned and well decorated.

Bad things about a Bank Job:

Religious view point: Job in conventional interest based bank is prohibited by Islami Sharia as in Islam Interest is strictly prohibited and declared as one of the great sin. So, most of the muslim banker after doing 7/8 years service when realized about the fact wants to switch the job to other industries or to islamic sharia based banks but, it is very difficult to do. So every muslim should think a lot before taking a job in a conventional interest based bank. It will also create mental pressure on them.

More work pressure: In Banking job work pressure is normally very high and it build mental pressure which will eventually effect family life. Most of the private bank employee usually get ready for work between 7.30 to 8.00 am and return home at around 9 pm. Besides, banker have to face unusual business target i.e. deposit, lending, fee income, card sale etc.

      

Top Five Private Commercial Banks in Bangladesh

Based on Brand Image, Market Impression, Asset Quality, Corporate Governance, Customer Service, public trust and international acceptance it appears that Top Five (5) Local Private Commercial Banks in Bangladesh are:

1. Eastern Bank Ltd. - www.ebl.com.bd
2. The City Bank Ltd. - www.thecitybank.com
3. BRAC Bank Ltd. -www.bracbank.com
4. Islami Bank Bangladesh Ltd.-www.islamibankbd.com
5. Bank Asia Ltd.- www.bankasia-bd.com

General Required Documents for opening a Bank Account in Bangladesh.

To open account in the name of individual:

1. 2 copy of photographs of the account holder
2. 1 copy of photograph of the nominee
3. Copy of National ID Card
4. Tax Identification Number (TIN) Certificate
5. Copy of utility bill for address verification.

To open account in the name of proprietorship concern.

1. 2 copy of photograph of the proprietor
2. 1 copy of photograph of the nominee
3. Copy of National ID card of the proprietor.
4. Trade License
5. TIN Certificate

To open account in the name of the partnership concern

1. 2 copy of photograph of the partners
2. 1 copy of photograph of the nominee
3. Copy of National ID card of all the partners
4. Trade License
5. TIN Certificate
6. Partnership Deed 
7. Partnership Registration Certificate from RJSC.

To open account in the name of Limited Liability Company:

1. 2 copy of photograph of the authorized representatives of the company.
2. Board Resolution of the company for opening Bank Account.
3. 1 copy of photograph of the nominee
4. Copy of National ID card of all the representatives and directors of the company
5. Memorandum and Articles of the company.
6. Trade License
7. TIN Certificate
8. Registration Certificate from RJSC.

Loan Write Off Policy and procedures of Banks in Bangladesh

What is Loan Write-Off:
Loan write off is a process of removal of Bad/Non performing/toxic loan from the Balance Sheet. The writing-off of a toxic loan does not mean the loan has been forgiven. It means that the bank has made 100% provisioning (setting aside capital) against the loan, to protect depositors even if not a paisa of that loan is repaid. The amount that the bank has written off will not be counted as part of its gross and net non-performing assets. Bank Uses writing off to reduce non performing loans from the book as well as to minimize their tax liabilities. The borrower will not be exempted or pardoned from debt repayment as banks will not halt recovery. When a value is realised, it goes into the profit and loss account of the bank, and boosts the bank’s bottomline.

Loan Write off policy for Banks in Bangladesh:

Bangladesh Bank vide BRPD circular no. 1 dated February 06, 2019 on Loan Write-Off given updated policy guideline for writing off loans/investments of the Banks in Bangladesh and declared all other previous circulars/instructions on write off will be treated as null and void. Summary of the policy is depicted below:

1. Eligibility of Loans/Investments for Write-Off:

• No recovery since long and there is no hope for recover in near future
• Remain classified as Bad & Loss continuously for the last three years 

Exception: In case of dead person’s loan in his name or in his proprietorship concern’s name, Bank may write off the loan in their own judgement regardless of classification status and without filing a case against the borrower if not eligible to sue under Artha Rin Adalat Ain 2003. But, in case of proprietorship concern, earning capable heir of the dead man to be taken into consideration. 

2. Loan/Investment Account Write-Off procedure:

• Banks must take necessary action to sell mortgaged property against the loans/investments to be written-off and to recover the impaird asset from guarantors. If after taking necessary steps stated above, the loan remains unrecovered it will be eligible for write-off.

• Legal suit must be filed under Artha Rin Adalat Ain- 2003 before writing-off the loans/investments. Exception: loan amount below Tk. 200000 and not mandatory to sue under Artha Rin Adalat Ain 2003.

• 100% provision must be kept for the amount equals Loan Balance before write-off minus interest kept in suspenses. If already kept provision is less than required provision then additional provision to be kept by deducting present year income account.

• No Loan/Investment account can be write-off partially i.e. partial write-off is prohibited.

• Board of Directors approval must be obtained before Loan/Investment account write-off.

3.Recovery off Written-off Loans:

• Bank must form separate recovery unit to recover the written off loans.
• All out legal actions to be continued for recovery of the loan

4. Reporting of Written-off loans:

• Written-off loans must be report in the CIB report of Bangladesh Bank as “BLW”

5. Other Instructions:

• Written-off loan can no be restructured and rescheduled. Only new repayment scheduled may be granted for settlement under exit plan. However, in CIB report it must be reported as “BLW”.
• Prior approval from Bangladesh Bank required for loans related to director/prior director of a Bank.

Banks bracing for big hit on profits

Banks bracing for big hit on profits: Banks will have a hard time logging in profits in the coming days because of the latest government decision to fix interest rate for lending at 9 percent and for deposit at 6 percent.