Posts tagged: Portfolio management

Infographic: TBS

Taka has been devalued against the US dollar yet again. The Bangladesh Bank made the adjustment on Monday to sell dollars from its reserve at Tk103, which was Tk102 until Sunday.

With the latest adjustment, the greenback price has increased 14 times since the beginning of FY23 amid depleting foreign exchange reserves.

The central bank supplied $70 million to different banks at the new rate on Monday, according to official data, while the total release of dollars from the reserve in the current fiscal year amounted to $10 billion.

The country’s foreign exchange reserves now stand at a little more than $31 billion.

Earlier, the Bangladesh Bank sold $7.62 billion in FY22 after it bought around $8 billion from banks amid low imports and high remittance inflows in the pandemic-hit FY21.

Despite the repeated increases in prices, the supply of greenback from the reserve has been on the decline as the central bank is desperate to maintain a standard amount of foreign currency reserves.

“We do not receive the amounts of dollars we are asking from the central bank. As a result, we are forced to depend on high-priced dollars from markets,” a senior official of the treasury department of a state-owned bank said.

Another official from the central bank told The Business Standard that the Bangladesh Bank wants to reduce the gap in dollar prices, which is why it has been continuously raising the rate.

Both officials wished to remain unnamed as they are not authorised to talk to the media. They also hinted that the selling price of dollars from the reserve may increase further in the next few months.

Bangladesh Bank Governor Abdur Rouf Talukder earlier said the difference between market and central bank dollar prices will be brought down in phases.

“We are already close to implementing rational rates of dollars, which means all rates will be within a 2% difference. The central bank selling rate is still lower, we will gradually make it market-based,” Bangladesh Bank Spokesperson Md Mezbaul Haque told reporters last Sunday.

Several rates of dollars exist in markets, which the Association of Bankers Bangladesh and the Bangladesh Foreign Exchange Dealers Association revise from time to time. According to its latest revision, the rate is Tk105 for export proceeds and Tk107 for remittance.

Many banks, however, do not follow the rates for collecting remittance dollars; As many as 20 banks are now offering up to Tk114 per dollar for that.

On Monday, the average rate for import payments was fixed at Tk106.73 per dollar following the authorities’ instruction. Importers, however, said they were charged up to Tk115 for a dollar. Banks traded dollars among themselves at the highest rate of Tk107, as of Sunday.

Infographic: TBS

Deposits in the country’s banks increased by about Tk17,000 crore in February compared to the previous month.

The amount of loans disbursed by banks during the period has increased by around Tk6,000 crore.

Regarding the reasons for the increase in bank deposit, Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, told TBS, “In October and November last year, there was a crisis of confidence due to various incidents in the banking sector. At that time, we saw a lot of withdrawal pressure in the banks.

“The customers’ confidence in banks has recently increased due to various campaigns of the central bank and the commercial banks. Customers are now returning to banks. Besides, most banks have increased interest rates on deposits.”

On condition of anonymity, the managing director of a bank said customers of Islamic banks have been making deposits in the conventional banks for the last two months. Foreign banks were also getting very good deposits.

Besides, the banks have become very cautious in granting loans as many of the previous loans have defaulted. Moreover, due to liquidity stress in the banking sector, not all banks are in a position to lend much, he added.

According to the central bank data, the total amount of deposits in the banks stood at Tk15.05 lakh crore at the end of February 2023. Out of this, demand deposits were Tk1.79 lakh crore and time deposits were Tk13.26 lakh crore. At the end of January, the total deposit was Tk14.88 lakh crore.

In October 2022, the amount of deposits in the banks was Tk14.90 lakh crore. In November 2022, it was Tk14.87 lakh crore, which increased to Tk14.89 lakh crore in December that year.

At the end of February 2023, the amount of loans in the banking sector stood at Tk14.17 lakh crore, which was Tk14.11 lakh crore at the end of January.

The amount of loans in banks was Tk14.41 lakh crore in December 2022, Tk14.18 lakh crore in November, and Tk14.03 crore in October last year.

According to the central bank data, the amount of bank deposits has been increasing for the past two months.

The year-on-year growth in deposits in February was 6.86%. Earlier, in January the rate was 6.14%, which means deposit growth increased by 72 basis points in a month.

The deposit growth was 5.44% in December 2022. On the other hand, loan growth declined to 13.26% in February from 13.89% in January 2023.

Most banks increased deposit rates in February

Most of the banks increased the deposit rate in February. They also increased the lending rate but it was lower than that of deposits. As a result, the interest income of the banks increased slightly in February compared to January.

According to the central bank data, the average interest rate on deposits rose to 4.31% in February from 4.29% in January. It was 4.23% in December 2022. The rate was 4.02% in February last year.

In February, the average interest rate on loans rose 3 basis points to 7.27% from January. This has affected the interest income of banks. It increased to 2.96% in February from 2.95% in January this year.

On 15 January this year, the central bank lifted the deposit rate cap fixed at 6% and allowed a 3% interest rate hike on consumer loans. After that, the commercial banks increased the deposit rate to attract more deposits.