Outgoing money laundering through trade has not been stopped completely but reduces significantly and it is reported that big businesses laundered a huge money before, said Selim R. F. Hussain, Chairman of the Association of Bankers, Bangladesh (ABB), and Managing Director (MD) and Chief Executive Officer (CEO), of Brac Bank Ltd, on Monday.
He was speaking at a rare ABB press conference titled ‘Banking Sector Outlook 2023’ held at the Brac Bank head office at the Gulshan area in Dhaka on Monday. ABB is a platform for top Bankers that concentrates on different contemporary issues and provides necessary suggestions, and opinions to the Banks and Regulatory Authorities when it is required.
Selim R. F. Hussain said the foreign currency stress on banks has been easing gradually and the situation will soon improve attributing to the central bank’s initiatives towards declining import costs, healthy export receipts, and remittance inflows.
Replying to a question regarding the country’s financial accounts, he said it has become comfortable now while more improvements are on the way as there are prospects of entering foreign funds from development partners like Asian Development Bank, World Bank, International Monetary Fund, Asian Infrastructure Improvement Bank, Japan and South Korea and so on.
He said, for the first time ever, a 25 percent depreciation of local currency had created a huge macro-economic stress by impacting hardly the foreign currency supply, and fueling the inflationary pressure.
He lauded the central bank’s initiative and policy interventions from time to time towards ‘good dealing’ with the stress.
“Still there is stress but we are definitely much better now. In the past eight months, banks were in a situation that often went through payment delay, deferred payment, and foreign currency crunch in case of new L/C opening,” Selim R. F. Hussain told the press conference.
Regarding money laundering through banking channels, he said “big businesses laundered money abroad through trade. They have shown us prices of capital machinery and other goods and asked us to approve that. We had no choice as there was no uniform price code or a referral price from the National Board of Revenue (NBR) to check back. In the case of exports, there were under invoices in a similar way.”
He maintained, “We had no on-site or spot mechanism to check prices when a client came to us in order to open a letter of credit (L/C). Following Bangladesh Bank’s directive, we have become cautious in this regard and applied digital data sources available on the internet, to check prices while opening L/Cs. As a result, money laundering through trade has reduces significantly. We won’t say it has been stopped totally, but it is reduced. And, the scope of money laundering through trade will be reduced more in the coming days.”
Supplemented to this regard by, Mashrur Arefin, MD and CEO of The City Bank Ltd, “Monthly import spending decreased from $7.0 billion to $ 4.5 billion per month, paving the way to saving $ 2.5 billion. Out of $ 2.5 billion, $ 1.0 billion is being saved from a reduction in the import of raw materials for the textile and clothing industry. The remaining $ 1.5 billion is a matter, which we had to pay for over-invoicing or under-invoicing in imports. With regard to capital fly or money laundering, the case is here, and it needs to be assessed properly.”
He said banks are working smoothly with sufficient liquidity as the entire banking sector has excess liquidity amounting to Tk 1 lakh and 36 thousand crores. He also noted that the banking industry has experienced a rising deposit although there are reports that some banks lost deposits. He said the industry together received Tk 52 thousand crore deposits last year, which was higher than the previous year.
He said the BB had injected a lot of local currency into banks through various revolving funds for industries, mainly small, micro, and medium enterprises, as against the crisis evolved from banks’ purchase of US dollars.
“There were no instances that a depositor came out empty-handed from a bank due to a fund crisis. No eligible borrower can also claim that bank is not disbursing loan,” Mashrur added.
He said the banks’ investment declined due to entrepreneurs’ unwillingness towards new investment or expansion when the country is going through economic stress, and added, “They are waiting.”
Meanwhile, applauding the Bangladesh Bank’s (BB) initiative towards introducing the ‘Interest Rate Corridor’, Selim R F Hussain said the ideal situation is that the rate of interest should be based on the market.
Commenting on inflation, he stressed the need for reforms in the entire supply system of essential commodities.
Answering questions from journalists regarding non-performing loans (NPL), Selim R F Hussain said, “NPL has been the big problem of banks in our country. Only banks and the central bank alone couldn’t resolve it. It needs to be resolved by coordinated policy interventions involving other actors too.”
He said, “There is a legacy of big loans in our banking sector.”
Referring to an old quote from former BB Governor Fazle Kabir, he said, “In Bangladesh, the business section’s ownership of banking companies has been the main problem connecting to the NPL. In developed economies, even in neighboring India, such ownership is not allowed. In our country, it is happening. So, it needs to be reformed and it is not possible to be done overnight.”
He also stressed the need for applying international standard provisioning, classification, and rescheduling of loans.
The experienced top banker also said that expatriate Bangladeshi workers have not been treated well at arrival or departure at the airports although they are one of the main pillars of the country’s economy.
“They send valuable remittances in foreign currency for us, which have paved the way for economic recovery and our economy has been saved multiple times by their income from abroad. Unfortunately, we do not value their sacrifices,” he added.
Among others, ABB Vice Chairmen and MD and CEO of Dutch Bangla Bank Ltd, Abul Kashem Md. Shirin, MD and CEO of First Security Islami Bank Ltd, Syed Waseque Md. Ali, ABB Treasurer and MD and CEO of Midland Bank Ltd, Md. Ahsan-uz Zaman spoke at the press conference.
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