Banks' deposit growth witnesses rising trend

AppId is over the quota
AppId is over the quota
Siddique Islam

The growth of overall deposit with the country's banking system witnessed a rising trend in recent months mainly because of higher inflow of remittances, decreasing net sales of savings certificates and sluggish stock market.

Bank deposit increased by about 14 per cent to Tk 4238.88 billion on October 06, 2011 against Tk 4140.53 billion on June 30 this year when the annual rate of deposit growth stood at 11.22 per cent, according to the central bank statistics.

"Deposit growth rate has comparatively been higher than that of credit growth in the banking sector in recent months, reflecting normal economic activities in the country," a senior official of the Bangladesh Bank (BB) told the FE Sunday.

Credit growth, particularly in private sector, rose by 8.80 per cent to Tk 3444.49 billion in the period under review from Tk 3362.23 billion on June 30 last when the annual rate of growth was 6.20 per cent.

He also said the central bank has calculated the growth rates, using a benchmark which was set considering the situation on December 30 last in both money and stock markets.

"We've calculated the growth performance of both bank deposits and credits, considering the volatile situation in both money and stock markets on December 30 last," the central banker said, adding that the BB wants an alignment between growth of credit and increase of deposit.

"The central bank has already set credit-deposit ratio (CDR) at 85 per cent for conventional banks while Sharia-based Islamic banks, it remains at 90 per cent as the safe limit," the BB official noted.

At least, 16 banks, out of a total of 47, have exceeded their CDR limit for credit disbursements on October 06 last, the BB data showed.

"We're watching closely the overall CDR positions of the commercial banks to avoid any risk," the central banker said, adding that the BB is issuing letters, asking the banks concerned to bring down their CDR within a safe limit.

Talking to the FE, a senior private banker said higher inflow of remittance has contributed to increased bank deposit in the recent months.

Bangladesh received $2.96 billion as remittances during July-September period of the current fiscal year (FY), registering an 11.35 per cent growth over the corresponding period of the previous fiscal, the BB data showed.

About credit flow, he also said most commercial banks have followed selective banking, instead of 'mass banking' during the period under review, in line with the BB's latest monetary policy statement (MPS).

In its latest half-yearly MPS, the central bank stated that it would aim at containing inflationary pressures through discouraging credit flow to unproductive sectors and for speculative purposes including real estates and investments in stock market, beyond affordable limits.

"We're now discouraging investments in less productive sectors including consumers' credit," another senior official of a leading private commercial bank said.

The net sales of the National Savings Directorate (NSD) certificates fell drastically -- by more than 69 per cent -- to Tk 3.37 billion in July-August period of the FY 12 against Tk 10.98 billion in the same period of the FY 11.

"Some savers deposited their funds with the commercial banks after encashment at maturity of their savings certificates," the private banker said, adding that stock investors have also deposited their money with the banks after the share market debacle.

The country's stock market lost substantially, in terms of market capitalisation of all the listed issues, leading to a sharp drop in its index, in recent months.

The benchmark index of Dhaka Stock Exchange (DSE), the country's prime bourse -- generally known as DGEN -- came down to 5077.13 point Sunday from its highest 8918.51 point on December 05 last, the DSE data showed.

Source: thefinancialexpress-bd.com

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India Outsourcer predictions 18 percent growth

Agence France-Presse. New Delhi

India's flagship outsourcing industry is expected to post from 16 to 18 percent export growth despite fears of a fresh collapse in the American and European key markets, an industry body said.

The National Association of software and service companies, or NASSCOM, projected area score would export in February up annual sales of $68 Milliarden-$ 70 billion in the fiscal year began 1 April.

"Our discussions with companies make us believe that 16 to 18 percent sales growth is still achievable," NASSCOM President som Mittal the AFP on the edge of an outsourcing event said Tuesday.

"We change not our forecast," Mittal said, adding that the aim of this year's "conservative." was framed

Other leading Indian outsourcing companies are also bullish about growth.

'So far, we have seen no signs of a slowdown in our business' Matthew Vallance, Chief Executive of Firstsource solutions, told AFP.

Outsourcing companies were under pressure on concerns about the revenue shares having the slowdown amid fears of a double-dip recession in the United States and Europe, and analysts was the sector downgrade.

But on Tuesday, stocks of India's largest outsourcing company, TCS, 6.7 percent of Infosys, recovered reinforced 981.6 rupees ($21) during India's second-largest software services company, almost four percent to 2,276.95, as investors by the NASSCOM celebrated projection.

At the same time, former NASSCOM Chairman Pramod Bhasin, founder of the Indian back-office services Genpact, said he 'more rhetoric' expected in the United States against job outsourcing.

Is already high, fueled by increased unemployment in the United States against outsourcing.

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| Source: newagebd.com

BD's growth outlook uncertain, says WB

AppId is over the quota
AppId is over the quota
Bangladesh has insufficient fiscal leeway to cushion the impact of a global slowdown and its growth outlook for the year to June 2012 is uncertain, the World Bank said on Tuesday, reports Reuters.

Areas of concern include an increasing fiscal deficit, high and volatile inflation, overshooting of monetary targets, financial sector weaknesses and growing external imbalances, it said.

The country's year to June 2011 growth rate of 6.7 per cent, helped by strong performance in the manufacturing and construction sector and a bumper harvest, can only be sustained if exports continue to grow, according to the World Bank's bi-annual economic update.

What would work in Bangladesh's favour are lower international commodity prices, particularly oil and food, the report said.

Bangladesh's government is grappling with high inflation and aims to bolster economic growth to 7.0 per cent in the 2011-12 fiscal year, driven by exports and inflows of remittances.

Exports, largely garments, rose 22 per cent year on year in the three months to September while funds from Bangladeshis working abroad rose 9.0 per cent, a slower pace of growth than the previous year.

AFP adds: Global economic uncertainty looks set to scupper Bangladesh's ambitious plans for 7.0 per cent economic growth in the current fiscal year, the World Bank said Tuesday.

The impoverished South Asian country had unveiled the growth target -- the highest since the mid-1970s -- in the budget in June, after it clocked 6.7 per cent growth in the previous 2010-11 fiscal year.

The World Bank said the same level of expansion "can only be repeated" if exports continue to grow.

Export growth, which stood at 30 per cent in the first two months to August, plunged to a meagre 2.3 per cent in September as apparel shipments to key markets in Europe and the United States lost steam.

"Bangladesh has limited room for manoeuvre to cushion the impact of a second global slowdown if it happens," said Sanjay Kathuria, the World Bank's lead country economist for Bangladesh.

"It can affect Bangladesh's balance of payments through its impact on exports and remittances, put pressure on the exchange rate and increase economic uncertainty which might weaken investment and growth," the bank said.

Foreign remittances, which make up 10 per cent of the country's gross domestic product (GDP), have faltered in the wake of the Arab Spring, with 40,000 Bangladeshi workers returning from Libya alone.

Manufacturing has also been hit hard by an energy crunch caused by the suspension of new natural gas connections by state-owned monopolies.

Our Staff Reporter adds: A slow pace of reforms in Bangladesh can affect its rate of investment, as can inadequate energy supply and poor quality of its infrastructure. The changes in trade reforms and weakening of the financial sector can also affect export growth and investment.

This was indicated by the latest bi-annual economic update of the World Bank (WB), released on Tuesday.

"Improved fiscal and monetary discipline, combined with stronger efforts to address energy and infrastructure deficits, will be critical to sustain the growth performance of Bangladesh," said Zahid Hussain, WB senior economist for Bangladesh.

The Washington-based lender, however, foresees a favourable tilt towards the Bangladesh's economy as it said the lower international commodity prices, particularly oil and food, can give a breathing space to the country in the current fiscal.

Senior economist for Bangladesh at Washington WB headquarters Lalita Moorty said: "It will be vital for Bangladesh to ensure sound macroeconomic management, since expansionary macroeconomic policies could increase risks on the current account and make inflation management more difficult."

In its economic update, the WB said slowdown of remittances in the last fiscal, high and volatile inflation, overshooting of monetary targets, financial sector weaknesses, growing external imbalances and increasing fiscal deficit as well as composition of deficit financing remain areas of concern for the Bangladesh economy.

Lead economist of WB Dhaka office Sanjay Kathuria said Bangladesh has limited room for manoeuvring to cushion the impact of a second global slowdown if it happens.

"Rapid growth in subsidies, sustained high rate of growth of credit to the private sector and monetary financing of the fiscal deficit have led to the decline in maneuverability," he added.

Noting that the Bangladesh economy grew at 6.7 per cent in fiscal year (FY) 2010-11 continuing its recent upward trend in growth, the WB stated that the growth rate last fiscal reflected good performance in the manufacturing and construction sectors, two successive years of bumper crop harvest and sustained high contribution from the services sector, it added.

The report, however, noted the country's strong performance in FY11 can only be repeated if exports continue to grow, apparel exports gain from the recent India-Bangladesh agreement, and remittances continue to recover and the investment is boosted by improved infrastructure services, particularly power.

The economic update noted a protracted global economic slowdown could affect Bangladesh through several channels.

Meanwhile, another multilateral capital donor -- the Asian Development Bank (ADB) -- in its latest development outlook said Bangladesh's economy is expected to grow at 7.0 per cent rate in the current fiscal due to continuous export growth and expansionary domestic demand for rising remittance and income flows.

Source: thefinancialexpress-bd.com

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ADB names major challenges for BD's economic growth this fiscal

FE Report

The Asian Development Bank (ADB) has said rising inflation, inadequate power generation, lower than expected domestic revenue and foreign aid, global economic slowdown and political instability are major challenges for Bangladesh's economic growth this fiscal.

"Continuation of the high petroleum and power subsidies also implies lower allocations for priority social and physical infrastructure, affecting the country's long-term growth prospects," the latest Quarterly Economic Update (QEU) of ADB said Friday.

The Manila-based multilateral capital lender said under pricing in power and energy products inhibits sector development and exerts pressures on the government budget through larger subsidy.

ADB's report has also said the estimated budget deficit at five per cent of gross domestic product (GDP) could cross the limit this fiscal due to higher subsidy allocations.

It said: "Larger borrowing from the banking system could stoke inflation, crowd out private investment and undermine fiscal sector discipline in the current year.

On the other hand, meeting the deficit target by trimming annual development programme (ADP) will affect construction of essential infrastructure."

The ADB cautioned Bangladesh's energy supply shortage saying growing power supply and energy shortages are the binding constrains to achieving the growth, job, and poverty reduction targets in the sixth five year plan (FYP).

The government aims to generate 2,157-megawatt (mw) of electricity by 2012, but if gas availability is not improved, higher generation targets may be difficult to meet, it added.

Greater attention is needed for making investment in renewable and clean energy, finalising the coal policy, importing power and liquefied natural gas, attracting private investment, and improving capacity and governance in the power and energy sectors, it suggested.

The Manila-based lender praised the government's initiatives on building larger infrastructure like Padma Bridge and Dhaka Elevated Expressway.

It, however, expressed the view that the budget allocation in road and railway has increased significantly but ensuring efficient use of such allocations as well as monitoring the cost and quality of work, are critical.

The economic update said growth in agriculture is likely slow to 4.6 per cent in 2011-12 fiscal from 5.0 per cent in FY2011, because of the high base in two successive years.

ADB has suggested for continuous support by the government to expand irrigation facilities for bringing new areas under cultivation, to raise cropping intensity through the spread of hybrid crop cultivation, and to create an incentive regime to enhance the commercial viability of agriculture for sustaining high agriculture growth.

It said Bangladesh's major challenges to macroeconomic stability in FY2011 were the rapidly rising inflation and the growing imbalance in external trade.

The government adopted an expansionary stance for the FY2012 budget to help attain a 7.0 per cent growth rate, while aiming to contain inflation within 7.5 per cent.

To balance higher economic growth with macroeconomic stability, close coordination between monetary and fiscal policies will be necessary to control credit expansion, contain inflation and ease balance of payments pressures, while a steady flow of credit to the private sector has to be ensured, it said.

The economic update said: "Budget finance from the banking system should be closely monitored. To achieve targets for growth, jobs, and poverty reduction under the sixth FYP, large investments are needed for power, transport, human capital, and technological improvements."

Policy and institutional reforms will need to be accelerated and capacity issues in line agencies will have to be quickly addressed to create conditions that support better growth outcomes, it noted.

ADB said industrial sector growth is expected to edge up to 8.8 per cent in

FY2012, with exports maintaining healthy performance, thrust sectors responding positively to government incentives provided in fiscal year (FY) 2012 budget, small and medium-sized enterprises (SMEs) and agro-based industries performing better due to buoyant domestic demand and easier access to credit, and continued growth in housing and construction activities.

To maintain strong sector performance, gas and electricity should be made available, port services, improved, and costs of doing business, reduced, the Bank suggested.

ADB' economic update said the half-yearly (July-December 2011) monetary policy aims to continue the central bank's tighter monetary policy stance to rein in credit expansion to control inflation and preserve external sector balance.

The monetary policy pins the hope on the possibility of controlling credit flows to wasteful, unproductive, and high-risk sectors, while ensuring adequate credit flows to productive sectors in manufacturing, agriculture, trade, and other services, it added.

ADB said: "Widening credit access for the underserved productive sectors will be one of the major priorities under the current monetary policy statement.

Regulating credit flows to unproductive sectors, and redirecting them to the more productive ones will be a major challenge, requiring close monitoring by the central bank of commercial banks' credit operations."

The Asia-Pacific regional lender said the major stock market indicators remained subdued following a sharp fall in prices in early December 2010. "Dhaka Stock Exchange (DSE) general index declined by 26.2 per cent in end June 2011 from the level of end-December 2010."

"The government announced ad hoc measures to stabilize the market and improve investor confidence, including advising commercial and merchant banks to reinvest their profits, instructing merchant banks to stop the practice of forcing clients to sell shares, and removing index circuit breakers. The government has set up the Bangladesh Fund, aimed at stabilizing the stock market," the economic update added.

Source: thefinancialexpress-bd.com

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