Financial institutions have traditionally been the major source of long-term funds for the economy in line with the development objective of the state. A wide variety of financial institutions (FIs) emerged over the years. While most of them extend direct finance, some also extend indirect finance and still some others extend largely refinance. FIs can be broadly categorized as nature of their operations.
Non-Bank Financial Institutions (NBFIs) in Bangladesh are gaining increased popularity in recent times. Though the major business of most NBFIs is leasing some are also diversifying into other lines of business like term lending, housing finance, merchant banking, equity financing and venture capital financing. The purpose of this paper is to highlight different features of NBFIs, their contribution to the overall economy and the product base of NBFIs. The paper also describes the performance of NBFIs as measured by different financial instruments, along with the effects of banks entry into the non-bank financing area. In addition, non-bank financial sector is important to increase the mobilization of term savings and for the sake of providing support services to the capital market. The focus of this paper is to highlight the necessity and importance of NBFIs to strengthen the financial system for rapid economic development of the country by introducing the diversified product.
Special emphasis has been given to identify the challenges faced by NBFIs in Bangladesh. And finally, development of NBFIs as well as their role in strengthening the financial system of Bangladesh by introducing the new financial instruments has been discussed. It is found that despite several constraints, the industry as a whole is performing reasonably well. Given appropriate support, NBFIs will be able to play a more significant role in financial intermediation.
Building a sound financial system is an immense necessity for the economic development of a country. The main task of the financial system is to mobilize funds from the surplus budget unit to deficit budget unit. Financial system provides a strong mechanism for collection and allocation of financial resources among the various alternatives. However, in a developing country like Bangladesh it is very hard to reach to a sound financial system due to the lack of requisite institutions, expertise and resources. Many legal and regulatory frameworks are needed to ensure discipline in the financial system. For these reasons, careful assessment of the financial system is necessary to determine about which features of the financial system are basic and which features are secondary and the types of institutions that are essential in the process. Actually, financial system is decomposed of into two basic types of institutions. One is the banking financial institutions (BFIs) and the other is the non-banking financial institutions (NBFIs). These two financial institutions are different in respect of their activities and treatment of the assets and liabilities in the financial market. For a well functioning financial market along with the BFIs, NBFIs have an important role to uplift the economic activity. These two financial sectors can simultaneously build up and strengthen the financial system of the country. This report analyses the importance and roles of NBFIs in developing economy of Bangladesh.
Our study is confined to 31 NBFIs who got license from Bangladesh Bank up to 2011 under the Financial Institution Act-1993 and Financial Institutions regulations –1994 from which 29 companies are in operation. Development of the NBFIs in a sustainable basis contributes to the speed and efficiency of the financial system. The necessity for the development of NBFIs could be best judged with the following issues.
Firstly, the NBFIs are markedly different from the banking institutions and with different phenomena. These two kinds of financial institutions are complementary rather than substitute organs in the financial system. Existence of banking and non banking financial institutions, money market and capital market keep the financial sector complete and enhance the overall growth of the economy. Secondly, there is a maturity mismatch in the sources and uses of funds in our financial system, which leads inefficiency in the financial system. Commercial banks by their definition are unsuited for long term lending. Inefficiency of BFIs in long-term loan management has already leaded an enormous volume of outstanding loan in our economy. Private commercial banks are less experienced and less equipped in this regard and they would not take the load or be able to take future challenges of term lending of the country. At this backdrop, in order to ensure flow of term loans and to meet the credit gap, development of NBFIs is a compelling necessity for the economy. Thirdly, sophisticated and well-developed capital market is considered as the hallmark for a market economy worldwide. The health of the capital market is largely relied upon the health of the banking and non-banking financial institutions. Day by day NBFIs participation in capital market is increasing. Although NBFIs have immense necessity and greater importance in the financial system of Bangladesh, they are severely suffering from some problems including the fund problem in terms of both availability and cost. Initiatives from all concerns are necessary to eradicate the fund constraints to ensure easy flow of fund. The existing regulatory and legal frameworks for NBFIs are not adequate in a greater extent as compared to BFIs. Bangladesh Bank has taken several initiatives in recent years to improve the suitability of the regulatory framework.
The focus of this report is to highlight the necessity and importance of NBFIs along with BFIs to strengthen the financial system of overall economic development of the country. We also put insight into the problems and future prospects of NBFIs. The growth of NBFIs in terms of assets and liabilities and diversified areas of business has significantly increased. In this paper an attempt has been made to highlight different features of NBFIs to identify their importance in financial system of Bangladesh. Special emphasis has been given to the complementary role of NBFIs with BFIs for efficiency of financial system, contribution in term lending, role in capital market development, problems in availability of fund, impact of NBFIs’ Deposit Mobilization on the Monetary Policy etc.
|BACKGROUND OF THE STUDY|
Non-Bank Financial Institutions (NBFIs) in Bangladesh are gaining increased popularity in recent times. Industrial Promotion and Development Company (IPDC) was the first private sector NBFI in Bangladesh, which started its operation in 1981. Since then the number has been increasing and in December 2011 it reached 31 but 29 companies are operating across the country. Of these, one is government owned, 15 are local (private) and the other 13 are established under joint venture with foreign participation.
Though the major business of most NBFIs is leasing some are also diversifying into other lines of business like term lending, housing finance, merchant banking, equity financing and venture capital financing. The purpose of this paper is to highlight different features of NBFIs, their contribution to the overall economy and the product base of NBFIs. The paper also describes the performance of NBFIs as measured by different financial indicators, along with the effects of banks entry into the non-bank financing area. In addition, non-bank financial sector is important to increase the mobilization of term savings and for the sake of providing support services to the capital market. The focus of this paper is to highlight the necessity and importance of NBFIs to strengthen the financial system for rapid economic development of the country. Special emphasis has been given to identify the challenges faced by NBFIs in Bangladesh. And finally, development of NBFIs as well as their role in strengthening the financial system of Bangladesh has been discussed. It is found that despite several constraints, the industry as a whole is performing reasonably well. Given appropriate support, NBFIs will be able to play a more significant role in financial intermediation.
|RATIONAL OF THE STUDY|
Non-bank financial institutions (NBFIs) represent one of the most important parts of a financial system. In Bangladesh, NBFIs are new in the financial system as compared to banking financial institutions (BFIs).
Traditionally our banking financial institutions are involved in term lending activities, which are mostly unfamiliar products for them. Inefficiency of BFIs in long-term loan management has already leaded an enormous volume of outstanding loan in our country. At this backdrop, in order to ensure flow of term loans and to meet the credit gap, NBFIs have immense importance in the economy. In addition, non-bank financial sector is important to increase the mobilization of term savings and for the sake of providing support services to the capital market. Though the financial institutions play a vital role of the economy hence the FIs are not strong enough compared with the Banking Institutions. The main problem of this industry is the raising of fund and the cost of fund also the tax rate is very high compared with other industries. So it is important to focus on the development of the Financial Institutions of our country.
To make a report resourceful, various aspects and experiences are needed. But I have faced some barriers in making a complete and perfect report. These barriers or limitations, which hinder my work, are as follows:
• Difficulty in accessing data of its internal operations.
• Non-Availability of some preceding and latest data.
• Some information was withheld to retain the confidentiality of the organization.
I was placed for only around 3 months of time & working like a regular employee that hindered the opportunity to put the effort for the study. The time span was not sufficient enough to learn all the activities of the organization properly. Therefore, it was very difficult to carry out the whole analysis.
The main objective of the report is to highlight the necessity and importance of NBFIs along with BFIs to strengthen the financial system of overall economic development of the country. We also put insight:
- The problems and future prospects of NBFIs.
- Get an overview of the industry
- The growth of NBFIs in terms of assets and liabilities and diversified areas of business has significantly increased.
- Challenging issues of NBFI
|METHODOLOGY OF THE STUDY|
a Fixing the Study Area:
The subject ‘Development of Financial Institutions to Strengthen the Financial Systems of Bangladesh’ is chosen for this study to highlight the current condition of the financial institutions in Bangladesh. The development of the FIs in Bangladesh have great prospect and these institutions also face some problems. The main competitor of this industry is banking sector industry, which is very strong and in leading position. So, it will be a great area for analyzing the present situations of the NBFIs.
b Data Collection:
Analysis has been made on the basis of the objectives mentioned before in the context of ‘Development of Non-Banking Financial Institutions to Strengthen the Financial Systems of Bangladesh’ A study on Bangladesh Bank The paper will be written on the basis of information collected from primary and secondary sources.
(i) Primary Data: Discussion with the respective organization’s officials.
(ii) Secondary data: For the completion of the report, secondary data has been collected.
The main sources of secondary data are:
- Annual Report of Bangladesh Bank.
- Website of Bangladesh Bank.
- Data from Financial Institution Act 1993 & Financial Institutions Prudential Regulation Act 1994
- Different Books, Journals, Periodicals, News Papers etc.
c Analyzing Data:
Various tools and techniques are used by the author in order to convert financial statement data into formats that facilitates the evaluation of a firm’s financial condition and performance, both over time and in comparison with industry competitors. These include different ratios, trend analysis, growth analysis and most important of all, common sense and judgment.
d Representing the Data and Preparing the Report:
The report has two main parts:
Part One: This is basically introductory part, the objective and scope of the study, limitations, and research methodology has been highlighted. Brief Introduction of Bangladesh Bank and Non-Bank Financial Institutions, NBFIs products and services, Role of Bangladesh Bank, Functions of NBFI and brief discussions about Financial Institutions operating in Bangladesh etc are presented.
Part Two: Detail about NBFI, Difference of Bank and Financial Institutions, Role of NBFI, Present condition of NBFI, Challenging issues of NBFI, Development of the Capital Market and the NBFIs Impact of NBFIs, Deposit Mobilization on the Monetary Policy, The Phenomenon of Long Term Financing and the Analysis of NBFIs Performance in Term Financing, this part also contains the recommendation, conclusion, reference & appendix of the report.
|OVERVIEW OF THE ORGANIZATION|
HISTORICAL BACKGROUND OF THE NBFI
The non-bank financial institutions operating in East Pakistan were the Industrial Development Bank of Pakistan, Equity Participation Fund, Pakistan Industrial Credit and Investment Trust Corporation, Investment Corporation of Pakistan, National Investment Trust and insurance companies. Such institutions established in Bangladesh in the 1970s include the House Building Finance Corporation (1973) and the Investment Corporation of Bangladesh (1976). Other NBFIs established in the country up to 16 October 2011 are United Leasing Co., Industrial Development and Leasing Company, Industrial Promotion and Development Company, Saudi-Bangladesh Industrial and Agricultural Investment Company, Phoenix Leasing Company, Union Capital, Uttara Finance and Investment, UAE-Bangladesh Investment Company, International Leasing and Financial Services, Prime Finance and Investment, Bay Leasing and Investment, Delta-BRAC Housing Finance Corporation, Bangladesh Infrastructure Finance Fund Limited, Peoples Leasing and Financial Services, Infrastructural Development Company, Bangladesh Industrial Finance Company, National Housing Finance and Investment, MIDAS Financing, First Lease International, Agrani SME Financing Company Limited and Bangladesh Finance and Investment. These institutions extended their business in industrial, commercial and housing financing, and in the stock market activities. They are also granted permission by the Bangladesh Bank to participate in the inter-bank money market transactions.
|ROLE OF BANGLADESH BANK FOR NBFIs|
- The Bangladesh Bank (BB), as the regulator of NBFI operations in the country, has been pursuing policies and taking measures to ensure healthy and efficient expansion of NBFI activities in the country.
- In order to bring the NBFIs under an effective risk management system, BB identified four core risk areas in September 2005 covering credit risk management (CRM), asset and liability management (ALM), internal control and compliance (ICC), and information and communication technology (ICT).
- The BB also provided guidelines for the NBFIs to develop structures and undertake measures to improve their institutional risk management system in core risk areas.
- In line with core risks management guidelines, BB also introduced risk based audit system generally known as ‘system audit’ for the NBFIs. For the purpose, the Department of Financial Institutions and Market (DFIM) conducted a special inspection on the basis of these core risk areas in IDLC and Union Leasing Company Limited in July 2007. After modifications of the audit process based on the findings of this first phase inspection, the second phase inspection has started in January 2009 in IPDC and Prime Finance Limited. The remaining NBFIs would be brought under the audit system in phases.
- BB also plans to rank the NBFIs on the basis of their compliance status of core risk management guidelines.
- Against the backdrop of the global financial crisis, NBFIs have been asked to be cautious in their financial management. As a part of better management, BB has instructed the NBFIs whose classified loans to total outstanding loan ratios have risen sharply to take adequate steps to realize the default loans.
- The BB has asked the NBFIs to take measures to rationalize investment portfolios and overcome other adverse trends such as provision shortfalls.
- The NBFIs have been instructed to comply with the Anti-Money Laundering Ordinance 2008 and inform the Anti- Money Laundering Department of BB of any suspicious transactions.
- The BB has also taken initiatives for ensuring better corporate governance of the NBFIs through streamlining the managing boards for enhancing efficiency and accountability.
- The NBFIs on their part need to diversify in financial instruments and commercial papers to raise adequate funds from the market so that they can minimize their dependence on borrowing from the inter-bank money market at higher interest rates in times of need. In this respect, assistance needs to be provided to the NBFIs for securitizing and selling quality financial assets.
- Since the NBFIs serve as important complements to the banking sector in meeting the financing needs that are not well suited to the banks, the development of the NBFIs is crucial to ensuring a sound financial system in the country.
- It is important to view the NBFIs as a catalyst to economic growth and provide necessary support and guidance for their development within a longer term framework which would improve financial intermediation and enable the NBFIs to play their due role in overall development of the country.
|FUNCTIONS OF DFIM|
|Department of Financial Institutions and Markets (DFIM) regulate and supervise the Non-Bank Financial Institutions (NBFIs) of Bangladesh. NBFIs are licensed under the Financial Institution Act, 1993 and the Financial Institution Regulation, 1994.|
The key functions of this department are addressed below:
- Issuance of license for setting up of new NBFIs and branches of existing NBFIs under the Financial Institution Act, 1993.
- Formulation of prudential regulations to ensure the soundness of NBFIs.
- Monitoring of the activities of NBFIs to ensure corporate governance.
- Conducting of off-site supervision on NBFIs through collecting, analyzing and monitoring various data/information in regular basis to ensure compliance with policies, regulations and practices by them.
- Assessment of financial and managerial soundness of NBFIs through CAMEL rating and identification of the shock absorbing capacity through Stress Testing.
- Assessment and monitoring of the financial instruments issued by NBFIs, viz the issuance of Zero Coupon Bonds, Asset backed Securitization Bonds etc.
- Implementation of BASEL Accord in NBFIs to ensure Risk Based Capital Adequacy.
At present there are 31 NBFIs in Bangladesh of them 29 companies are under operation. The contribution of financing activities by NBFIs to the overall economy persistently has been increasing.
|FINANCIAL INSTITUTIONS IN BANGLADESH|
- Bangladesh Finance and Investment Co. Ltd.:
Bangladesh Finance and Investment Company Limited (BFICL) a non-banking finance company incorporated in Bangladesh on 10 May 1999 as a public limited company. It began business on 15 February 2000. Its authorized and paid up capital are Tk 500 million and Tk 23 million respectively. The capital is divided into ordinary shares of Tk 100 each.
- Bangladesh Industrial Finance Company Limited (BIFC):
Bangladesh Industrial Finance Company Limited (BIFC) is a joint venture Leasing and Financing Company, promoted by a group of’ Foreign and Local Sponsors.
- Bay Leasing and Investment Limited:
Bay Leasing and Investment Limited (BLIL), a second generation NBFI (Non Banking Financial Institution) was incorporated in 7 February 1996 sponsored by a group of prominent industrialists, businessmen and professionals.
- Delta Brac Housing Finance Corporation Ltd. (DBH):
Delta Brac Housing Finance Corporation Ltd. (DBH) is the pioneer, largest and specialist in Housing Finance institution in the private sector of the country. After commencing operation in the early 1997, the company has, registered commendable growth in creating home ownership among more than 23,000 families in Dhaka and other major cities of the country.
- Fareast Finance and Investment Limited:
Fareast Finance & Investment Limited-a leasing and financing company started its business in the early 2002 to serve its clients with high ethical standards and accountability. Fareast believes that each of its activities must provide satisfaction to its customers and will start progress for them.
- FAS Finance and Investment Limited:
FAS Finance and Investment Limited having its registered and operational office is located at Uttara Bank Vaban (5th Floor), 90 Motijheel B/A, Dhaka-1000, Bangladesh. This was incorporated in Bangladesh as a private limited company on September 27, 2001 and the company was subsequently converted into public limited company under the Companies Act, 1994. The company obtained license from Bangladesh Bank under the Financial Institutions Act, 1993.
- First Lease Finance and Investment Ltd.:
First Lease Finance and Investment Limited (FLFIL), having its registered and operational office is located at Jahangir Tower (3rd Floor), 10 Kawran Bazar C/A, Dhaka-1215, Bangladesh. This was incorporated in Bangladesh as a private limited company on June 28, 1993 and the company was subsequently converted into public limited company under the Companies Act, 1994. The company obtained license from Bangladesh Bank under the Financial Institutions Act, 1993 on October – 05, 1999. The Company provides lease finance for machinery, equipment, transport, housing etc for both industrial and commercial purposes.
- GSP Finance Company (Bangladesh) Limited (GSPB):
GSP Finance Company (Bangladesh) Limited (GSPB), having its registered and operational office is located at 1/C Paribag, Mymansingh Road, Ramna, Dhaka-1205, Bangladesh. The company was incorporated in Bangladesh as a private limited company on April 17, 1996. The company obtained license from Bangladesh Bank under the Financial Institutions Act, 1993.
- Hajj Finance:
Hajj Finance Company Limited, having its registered and operational office is located at Fajlur Rahman Centre (8th Floor), 72, Dilkusha Commercial Area, Dhaka-1000, Bangladesh. The company was incorporated in Bangladesh as a private limited company on July 02, 2007. The company obtained license from Bangladesh Bank under the Financial Institutions Act, 1993.
- IDLC Finance Limited:
IDLC Finance Limited is a multiproduct financial institution, established in 1985 with the collaboration of reputed international development agencies like Korean Development Leasing Corporation (KDLC), South Korea. The primary goal of IDLC was to help modernize the financial services industry, by introducing modern modes of financing hitherto unknown to Bangladesh. This, we set about to do, by pioneering the launch of a multitude of financial products and services.
- Industrial and Infrastructure Development Finance Company (IIDFC) Limited:
Industrial and Infrastructure Development Finance Company Limited (IIDFCL) was incorporated in Bangladesh on December 19, 2000 as a public limited company. The Company was licensed under Financial Institution Act, 1993 by Bangladesh Bank on January 23, 2001 and started operation from May 2001. The registered office of the Company is situated as Chamber Building (6th Floor), 122-124, Motijheel C/A, Dhaka – 1000, Bangladesh.
- Industrial Promotion and Development Company of Bangladesh Limited(IPDC):
IPDC is the first private sector Financial Institution in Bangladesh established in 1981 by a distinguished multilateral team of shareholders.
- Infrastructure Development Company Limited (IDCOL):
Infrastructure Development Company Limited (IDCOL) was established on 14 May 1997 by the Government of Bangladesh (GOB). The Company was licensed by Bangladesh Bank as a non-bank financial institution (NBFI) on 5 January 1998. Since its inception, IDCOL is playing a major role in bridging the financing gap for developing medium and large-scale infrastructure and renewable energy projects in Bangladesh. The company now stands as the market leader in private sector energy and infrastructure financing in Bangladesh.
- International Leasing and Financial Services Limited:
International Leasing And Financial Services Limited (International Leasing), a multi product joint venture financial institution has been established with the purpose of assisting the productive enterprises in Bangladesh through the provision of lease financing and related financial services for development of the industrial, energy, agricultural, transport, construction, telecommunication, power, medical, commercial and professional sectors.
- Islamic Finance and Investment Limited:
IFIL is a public limited company within the meaning of clause of section 2(1) of companies’ act, 1994 in Bangladesh fully owned by Bangladeshi nationals.
- Lanka Bangla Finance Ltd.:
Lanka Bangla Finance Limited (LBFL) a joint venture financial institution established with multinational collaboration is in operation since 1997 having license from Bangladesh Bank under Financial Institutions Act, 1993. With institutional shareholding structure, educated & motivated human resources, friendly working environment & dynamic corporate culture has enabled LBFL to be a diversified financial services providing institution of the country. Technical support provided by Sampath Bank Limited, Sri Lanka has been working as a catalyst to emerge LBFL as most innovative financial solution provider strictly in compliance with the rules & regulations of Bangladesh Bank.
- MIDAS Financing Limited (MFL):
MIDAS FINANCING LIMITED (MFL) is leading financial institution of the country licensed by Bangladesh Bank under the financial institutions Act 1993. MFL Housing Loan Scheme has been launched to fulfill the dream of the limited income people by extending financial support in the form of term loan for constructing a house and/or purchasing an apartment/readymade house/commercial space.
- 18. National Finance Limited:
National Finance Company Limited, having its registered and operational office is located at Unique Trade Centre (UTC), Level-10, 8 Panthapath, Dhaka-1215. The company was incorporated in Bangladesh as a private limited company on March 03, 2003. The company obtained license from Bangladesh Bank under the Financial Institutions Act, 1993.
- National Housing Finance and Investments Limited:
National Housing Finance And Investments Limited (NHFIL) is a unique Loans and Savings institution operating in our country. It is a Public Limited Company under the Companies Act, 1994 and licensed by Bangladesh Bank under the Financial Institutions Act, 1993. We were incorporated in August 18, 1998 with authorized capital Tk. 2000 million paid up capital of Tk. 400 million. Our finance includes Housing finance, Lease finance, Deposit scheme, Car Loan.
- People’s Leasing and Financial Services Ltd:
People’s Leasing and Financial Services Limited (PLFS) is a financial institution established within the ambit of Financial Institutions Act-1993 and was incorporated as a Public Limited Company under Companies Act-1994 on August 12, 1996. Company obtained license from Bangladesh Bank on November 24, 1997 to carry on lease finance business. Authorized Capital of the Company is Tk. 500 million divided into 5 million ordinary shares of Tk. 100/- each while Paid-up Capital as on September 30, 2004 stands at Tk. 130 million subscribed by the sponsors.
- Phoenix Finance and Investments Limited:
Phoenix Finance & Investments Limited (Former Phoenix Leasing Company Limited), one of the leading and reliable multi products Financial Institution in Bangladesh was incorporated in Bangladesh on April 19,1995 as Public Limited Company under the Companies Act 1994 and started its operation on May 9 1995 as a Non Banking Financial Institution under Financial Institution Act 1993 , it has changed its name to Phoenix Finance & Investment Limited (PFIL) with a view to reflecting multi-dimensional financial activities the company has been doing other than Lease Financing which although , has remained as the prime area of the financial activities.
- Premier Leasing and Finance Limited:
Premier Leasing & Finance Limited, a third generation financial institution, was registered on September 26, 2001 as a Public Limited Company as Premier Leasing International Limited with authorized capital of TK.400 Million and initial paid-up capital of TK.51 Million. The Company went for public subscription by floating its shares in the capital market in July 2005. Company’s issued and fully paid-up capital as on December 31, 2008 stood at TK.344 Million.
- Prime Finance and Investment Ltd:
Prime Finance is one of the leading financial institutions operating in Bangladesh. Our core competencies cover lease finance, term finance.
- 24. Reliance Finance
Reliance Finance Limited (REFL), began its journey in March 1996 as a Public Limited Company under license from Bangladesh Bank to provide innovative financial services. Since inception, REFL Company has been rendering prompt and cost effective financial services with distinctive customer service. The Company has diversified its business and the growth has been steady and satisfactory. Reliance Finance Limited (REFL), began its journey in March 1996 as a Public Limited Company under license from Bangladesh Bank to provide innovative financial services. Since inception, REFL company has been rendering prompt and cost effective financial services with distinctive customer service. The Company has diversified its business and the growth has been steady and satisfactory.
- Saudi-Bangladesh Industrial and Agricultural Investment Company Limited (SABINCO):
Saudi Bangladesh Industrial and Agricultural Investment Company Limited, popularly known by its acronym SABINCO, is a joint venture Industrial Finance and Investment Company owned by the Governments of Saudi Arabia and Bangladesh. It was incorporated under the Bangladesh Companies Act 1913 on 24th June 1984 with it’s headquarter in Dhaka. The company commenced operation in 1986. In 1993 Bangladesh Bank granted license to operate it as a Non-Banking Financial Institutions.
- The UAE-Bangladesh Investment Co. Ltd:
UAE Bangladesh Investment Company Limited a private limited company incorporated in Bangladesh under the Companies Act 1913 on 11 June 1987 with a desire to consolidate the joint efforts of the government of Bangladesh and United Arab Emirates to promote economic co-operation between them. To this effect, a contract was signed on 8 November 1986 between the governments of Bangladesh and Abu Dhabi Fund for (Economic) Development.
- Union Capital Limited:
UNION CAPITAL LIMITED is one of the largest investment banks and fastest growing financial institutions in Bangladesh. Previously, it was known as Peregrine Bangladesh which had its origins and businesses rooted in Hong Kong. Out of the local office of the erstwhile Peregrine Capital Limited of Hong Kong, Union Capital Limited, Dhaka emerged in early 1998 as a Bangladesh-based company led by a group of the foremost entrepreneurs of the country. Union Capital, within a short span of time, has proved its worth as a most forward-working vigorous organization achieving success with its wide international network and strong local base.
- United Leasing Company Limited (ULCL):
ULC was established in 1989 as a public limited company, to cater the investment needs of our economy.
- Uttara Finance and Investments Limited:
Uttara Finance and Investments Limited have been operating as Financial Institution since 7 May 1995 under license from Bangladesh Bank (Central Bank). The company extends lease, loans and asset management services. The company’s clientele base is from SME to large corporate houses. The company also accepts Term Deposits from individuals and corporate bodies.
- 30. Agrani SME Financing Company Limited: Agrani SME Financing company Limited is a completely government owned company. This company gets their license 31 January, 2011 from Bangladesh Bank. This FI is not started their operation yet. This FIs main business purpose is to give SME loan.
- 31. Bangladesh Infrastructure Finance Fund Limited: Bangladesh Infrastructure Finance Fund Limited Company is Government owned company. This company gets license from Bangladesh Bank 16 October, 2011. This FI is not started their operation yet.
|PRODUCTS AND SERVICES OFFERED BY NBFIs|
Non-Bank Financial Institutions play a key role in fulfilling the gap of financial services that are not generally provided by the banking sector. The competition among NBFIs is increasing over the years, which is forcing them to diversify to a wider range of products and services and to provide innovative investment solutions. NBFIs appear to offer flexible options and highly competitive products to help customers meet their operational and financial goals. The List below provides a summary of the product range offered by existing NBFIs of Bangladesh.
- Financial/Capital Lease : Provide a long-term solution that allows customers to free up working capital
- Operational Lease: An operational lease entails the client renting an asset over a time period that is substantially less than the asset’s economic life. It offers short-term flexibility, which may allow the customer to take advantage of off-balance sheet accounting treatment.
- Hire-purchase: A hire purchase is an alternative to a lending transaction for the equipment purchase. It is usually employed for retail or individual financing of smaller items, such as consumer products. However, hire purchase option is also suitable for business houses depending on tax practices.
- Sale & lease back: Ideal for customers looking to generate liquidity from their existing equipment and reinvest the proceeds back into the business.
- Home loan & real estate financing : House loan and real estate financing is extended for purchase of apartment and house, construction of residential house, purchase of chamber and office space for professionals, purchase of office space and display center, purchase and construction of commercial building, real estate developer for construction of apartment project. Mostly mid to long term in nature.
- Factoring of Accounts Receivables: Financing against invoices raised by the supplier after asking the delivery successfully. Major Features are evolving Short Term Facility, Permanent Assignment of Payment, Financing against invoices, Post-delivery financing
- Work order Financing: Finance against the assignment of bill arising out of work orders on a revolving basis. The company shall take assignment of suitable work orders and / or invoices and finance the client against those.
- Syndication of large loan: Making available a large financing for a corporate client. Arrange syndicated financing in the mode of loan, lease, equity, working capital, or any combination thereof. Particularly useful for large projects requiring large scale investment and no single financier wants to take the whole risk. Example: Greenfield project.
- Advisory Services: Advisory services are comprehensive financial, economic and strategic advice to companies for growth, profitability, and sustainability. This includes providing wide range of services, such as corporate counseling, project counseling, capital restructuring, financial engineering, diagnosing financial problems.
- Securitization: Securitization is the issuance of financial instruments backed by assets and/or cash flows. This is one of the modern financial services, which solves specific type of financial needs of business organizations.
- Merchant Banking: Issue Management, underwriting, Portfolio Management & Corporate advising.
- Securities Services: Brokerage Services and as full service Depository Participant (DP) Apart from the brokerage services, securities services also provide the services like BO (Beneficial Owner accounts opening and maintenance, Dematerialization, Re-materialization, Transfers and multiple accounts movement, Lending and borrowing etc.
|ANALYSIS & FINDINGS|
WHAT IS NBFI?
Non-bank Financial Institutions financial intermediaries that accumulate funds by borrowing from the general public and lend the same to meet specialized financing needs, but are prohibited to accept such deposits payable either on demand or by cheque, draft, etc, and operate checking accounts for which their liabilities are not a part of the money supply. The first non-bank financial institution (NBFI) was a fire insurance company established in 1680 in London.
The operations of NBFIs in Bangladesh are regulated by the Bangladesh bank. The grant of authority to engage in borrowing from the general public is normally based on such factors as minimum capital requirement, quality of management, compliance with the concerned laws, rules, and regulations, and stability of financial standing. NBFIs may grant loans to their members and the general public up to a certain amount and may also engage in trust functions with prior permission of the central bank. They are not allowed to engage in foreign exchange transactions.
NBFIs are specialists of the intermediation process and their origins can be traced to the development of specialized financial institutions. Some survived centuries of changing economic and financial developments. Others appeared in response to special opportunities or needs and have disappeared just as quickly. Their survival and existence depend upon their ability to (a) offer contracts that serve the needs of specialized customers, (b) maintain a spread between the rate they pay for funds and the rate they receive that will support their costs, and (c) meet commitment to suppliers of funds.
The non-bank financial sector has a wide diversity of institutions. Despite their importance as alternative sources of finance to the commercial banks, their liabilities may nevertheless be regarded as ‘near money’. The most important NBFIs, among others, are the building societies, hire purchase companies, leasing companies, mortgage companies, saving banks, pension funds, investment companies, investment trusts, security dealer/brokers, central provident fund (CPF), discount houses, securities companies, fund managers, venture capital companies and stock exchanges.
|THE ROLE AND FUNCTIONS OF NBFI|
One of the important roles which NBFI’s play in an economy is to act as a buffer, especially in the moments of economic distress. An efficient NBFI sector also acts as a systemic risk mitigator and contributes to the overall goal of financial stability in the economy.
Major functions of the NBFIs are as follows:
- 1. Financial Intermediation:
The most important function of the non-bank financial intermediaries is the transfer of funds from the savers to the investors.
Financial intermediation is economical and less expensive to both small business and small savers,
(a) It provides funds to small businesses for which it is difficult to sell stocks and bonds because of high transaction costs,
(b) It also benefits the small savers by pooling their funds and diversifying their investments.
2. Economic Basis of Financial Intermediation:
Handling of funds by financial intermediaries is more economical and more efficient than that by the individual wealth owners because of the fact that financial intermediation is based on
(a) The law of large numbers, and
(b) Economies of scale in portfolio management.
(a) The law of large numbers:
Financial intermediaries operate on the basis of the statistical law of large numbers. According to this law not all the creditors will withdraw their funds from these institutions. Moreover, if some creditors are withdrawing cash, some others may be depositing cash. Again, the financial intermediaries also receive regular interest payments on loans or investments made by them. All these factors enable the financial intermediaries to keep in cash only a small fraction of the funds provided by the creditors and lend or invest the rest.
(b) Economies of Scale:
Large size of the asset portfolios enables the financial intermediaries to reap various economies of scale in portfolio management. The main economies are:
- Reduction of risk through portfolio diversification
- Employment of efficient and professional managers
- Low administrative cost of large loans and
- Low costs of establishment, information and transactions.
3. Inducement to Save:
Non-bank financial intermediaries play an important role in promoting savings in the country. Savers need stores of value to hold their savings in. These institutions provide a wide range of financial assets as store of value and make available expert financial services to the savers. As stores of value, the financial assets have certain special advantages over the tangible assets (such as, physical capital, inventories of goods, etc.). They are easily storable, more liquid, more easily divisible and less risky. In fact, saving-income ratio is positively related to both financial institutions and financial assets; financial progress induces larger savings out of the same level of real income.
4. Mobilization of Savings:
Mobilization of savings takes place when the savers hold savings in the form of currency, bank deposits, post office savings deposits, life insurance polices, bills, bond’s equity shares, etc. NBFI provides highly efficient mechanism for mobilizing savings. There are two types of NBFITs involved in the mobilization of savings;
(a) Depository Intermediaries, such as savings and loan associations, credit unions, mutual saving banks etc. These institutions mobilize small savings and provide high liquidity of funds.
(b) Contractual intermediaries, such as life insurance companies, public provident funds, pension funds etc. These institutions enter into contract with savers and provide them various types of benefits over the long periods.
In Bangladesh the contractual intermediaries are not under the NBFI. Only depository intermediaries are regulated under the Financial Institutions Act 1993 and the Financial Institutions Prudential Regulation Act 1994.
5. Investment of Funds:
The main objective of NBFIs is to earn profits by investing the mobilized savings. For this purpose, these institutions follow different investment policies. For example, savings and loan associations, mutual saving banks invest in mortgages, while insurance companies invest in bonds and securities.
|BANKING AND NON-BANKING FINANCIAL INSTITUTIONS BASIC DIFFERENCES|
In Bangladesh now different commercial banks and the non banking financial organizations are operating there business. And every organization now involved attracting the retail customers that means the middle income group people of the country. To draw their attention the sells persons of different organization try to knock every possible door. These activities of different organization increase the interest about this sector. As both commercial banks and the non financial institutes are in the market, so it makes confusion to the general people about the activities of these organizations.
Banks, usually a corporation, that accepts deposits, makes loans, pays checks, and performs related services for the public. The Bank Holding Company Act of 1956 defines a bank as any depository financial institution that accepts checking accounts (checks) or makes commercial loans, and its deposits are insured by a federal deposit insurance agency. A bank acts as a middleman between suppliers of funds and users of funds, substituting its own credit judgment for that of the ultimate suppliers of funds, collecting those funds from three sources: checking accounts, savings, and time deposits; short-term borrowings from other banks; and equity capital. A bank earns money by reinvesting these funds in longer-term assets. A Commercial Bank invests funds gathered from depositors and other sources principally in loans. An investment bank manages securities for clients and for its own trading account. In making loans, a bank assumes both interest rate risk and credit risk.
Non-bank financial institutions represent one of the most important parts of a financial system. In Bangladesh, NBFIs are new in the financial system as compared to banking financial institutions (BFIs). Out of 31 companies 29 NBFIs are now working in the country. The NBFIs sector in Bangladesh consisting primarily of the development financial institutions, leasing enterprises, investment companies, merchant bankers etc. The financing modes of the NBFIs are long term in nature. Traditionally, our banking financial institutions are involved in term lending activities, which are mostly unfamiliar products for them. Inefficiency of BFIs in long-term loan management has already leaded an enormous volume of outstanding loan in our country. At this backdrop, in order to ensure flow of term loans and to meet the credit gap, NBFIs have immense importance in the economy. In addition, non-bank financial sector is important to increase the mobilization of term savings and for the sake of providing support services to the capital market.
The basic difference may include:-
- A Bank is an organization that accepts customer cash deposits and then provides financial services like bank accounts, loans, share trading account, mutual funds, etc.
- A NBFC (Non Banking Financial Company) is an organization that does not accept customer cash deposits but provides all financial services except bank accounts.
- A bank interacts directly with customers while an NBFI interacts with banks and governments
- A bank indulges in a number of activities relating to finance with a range of customers, while an NBFI is mainly concerned with the term loan needs of large enterprises
- A bank deals with both internal and international customers while an NBFI is mainly concerned with the finances of foreign companies
- A bank’s man interest is to help in business transactions and savings/investment activities while an NBFI’s main interest is in the stabilization of the currency.
|PRESENT CONDITION OF NBFI|
Currently, 29 NBFIs are operating in the country. Out of the total, only 21 NBFIs are listed to the SEC. The NBFIs will be allowed to raise their capital by issuing right and bonus shares within the stipulated timeframe. BB asked to the NBFIs to double the minimum paid-up capital of non-banking financial institutions (NBFIs) to Tk 1.0 billion by June 2012. According to the data available with the BB as of September 30 last, 10 out of 29 NBFIs have paid-up capital below Tk 1.0 billion (DFIM, 2011).
To improve the quality of financial intermediation and meet up the growing needs of funds for financing investments in different sectors of the economy, the government intends to intensify the financial market by granting permission to establish private NBFIs in conjunction with the private commercial banks. At present, non-bank financial sector of the country comprises investment and finance companies, merchant bankers, leasing companies, mortgage banks, insurance companies, and the capital market. Although small, the NBFI sector in Bangladesh is a growing component of the entire financial sector and NBFIs as a group create an opportunity to improve financial intermediation for the economy. NBFIs account for only 4% of the assets of the financial sector, compared to 70% accruing to the nationalized commercial banks (NCB) and 25% to the local private banks. NBFIs, however, account for 28.6% of the term financing (FY 2010) through leasing, project finance and merchant banking activities (BB, 2010). The major business of most NBFIs in Bangladesh is leasing, though some are also diversifying into other lines of business like term lending, housing finance, merchant banking, equity financing, venture capital financing etc. Lease financing, term lending and housing finance constituted 64.67 percent of the total financing activities of all NBFIs up to December 2010. A break-up of their financing activities reveals that the share of leasing and housing finance in the total investment portfolio of NBFIs has gradually decreased from 34.25 and 17.40 percent, respectively, in 2009 to 25.21 and 5.22 percent in 2010 Total housing loans from banks and financial institutions as of end June 2010 amounted to Taka 219.4P billion (Table 6.13), which was 8.1 percent of total credit to the private sector (BB,2010).
The NBFIs are increasingly coming forward to provide credit facilities for meeting the
diversified demand for investment fund in the country’s expanding economy. The outstanding position of industrial lending by NBFIs also increased by 27.66% of TK. 179,679,991 thousand at the end of December 2010 compared with Tk. 140,738,965 in December 2009. Total classified loan of all NBFIs stood at Tk.1054.32 crore in December 2010 against their total outstanding loan of Tk.17809.42 crore showing a classified loan to total outstanding ratio of 5.92 percent which was 6.24 percent at the end of December 2009 (DFIM, 2010).
The return on equity (ROE), which shows the earning capacity of shareholder’s book value investment, shows significant variation across NBFIs. In June 2011, the highest ROE is observed for BIFC (58.40 percent) followed by IDCOL (35.28 percent) and DBH (28.58 percent) (DFIM, 2011). On the other hand, ROEs of several NBFIs were lower than the industry average and the interest rate on deposits indicating requirements on the part of these NBFIs to access both low cost funding and ensure better portfolio management to improve performance.
As on 30th June, 2011 the total amount of capital and reserve of the NBFIs stood at BDT 51726.32 million. Total assets and total deposits of the NBFIs were BDT 273424.38 million and BDT 106276.19 million respectively. Total outstanding loans and leases of the NBFIs was BDT 190398.6 million (DFIM, 2011).
Major sources of funds of NBFIs are Term Deposit, Credit Facility from Banks and other NBFIs, Call Money as well as Bond and Securitization. NBFIs are allowed to mobilize term deposit only of tenor not less than six months. At present term liabilities are subject to a statutory liquidity requirement (SLR) of 5 percent inclusive of average 2.5 percent cash reserve ratio (CRR). SLR for the NBFIs operating without taking term deposit is 2.5 percent. BASEL Accord now in the process of test run phase will be made compulsory from 2012.
|(A) BUSINESS GROWTH|
Non-Bank Financial Institutions (NBFIs) are licensed and regulated under the Financial Institution Act, 1993. There are 31 NBFIs in the country among them 29 are under operation in market. Of these, one is government owned, 15 are local (private) and the other 13 are established under joint venture with foreign participation. As on 30th September, 2011 there are 158 branches of which 60 in Dhaka, 22 in Chittagong and the rest 76 in other districts. Though the major business of most NBFIs is leasing some are also diversifying into other lines of business like term lending, housing finance, merchant banking, equity financing and venture capital financing.
The major funding sources of NBFIs are capital, term and other deposits, and borrowings from banks & financial institutions. Banks are a major source for NBFIs to fund their asset deployment, either directly or indirectly. Banks also are major investors in bonds/debentures issued by NBFIs, resulting in a dependence of NBFIs on banks.
Chart 1: NBFI capital, deposit and borrowing trend (Source: Final Stability Report, BB, 2010)
NBFI capital, deposits and borrowings increased by 42.18 percent, 17.76 percent and 33.85 percent respectively in CY10 compared with the previous year. The trend of increasing capital shows a healthy financial base of the NBFIs.
The total Deposits of all the NBFIs at the December, 2010 equals to ……… crore BDT. Table below shows the increasing rate of Deposits of NBFIs in 2009 compared to 2008 but in 2010 though the percentage increased but compared to 2009 the percentage was not that much higher in 2010.Upto 2008 the deposit amount of the NBFIs are less but from 2009 the collection of deposits increases which shows the overall growth of the industry.
|31st dec, 2008|
|31st dec, 2009|
|31st dec, 2010|
Table 1: Total Deposit increasing Rate (Source: DFIM, BB,2010)
Chart 2: Total Deposit increasing Trend (Source: DFIM, BB,2010)
Assets & Financing Trend:
Total assets of all the NBFIs at the December, 2010 stands as crore BDT. NBFI total assets increased by 30.01 percent in CY10 compared with CY09. The size of the total assets of this sector relative to GDP (at constant prices, base year: 1995-96, BDT 3600.47 billion in 2009-10) was 7.44 percent in CY10. However, NBFIs still account for only 5.52 percent of the assets of the overall banking sector.
Chart 3: NBFI assets & financing trend (Source: Final Stability Report, BB, 2010)
The major portion of NBFI funds were deployed in term financing and lease financing. The volume of term financing increased by 61.66 percent in CY10 compared with CY09. However, lease financing decreased by 3.35 percent in CY10 compared with the previous year.
Liabilities & Equities:
Total Liabilities and Equities of all the NBFIs at the December, 2010 equals to ……… crore BDT. Compare with the year 2008 in 2009 the growth rate of the industry is so high. Table below shows the increment in Capital & Liabilities of NBFIs in last 3 years the Equity and Reserves also increases compared with the last years:
Total Capital & Liabilities
|31st dec, 2008||31st dec, 2009||31st dec, 2010|
|Total Paid up Capital|
|Total Statutory Reserve|
|Total Share Premium|
|Total Equity & Reserves|
|Total Term Loan Received|
|Total Term Deposits|
|Total Lease Deposits|
|Total Capital & Liabilities|
Table 2: Three Years Total Capital & Liabilities Position (Source: DFIM, BB,2010)
Chart 4: Financial Institutions 3 Years total Liabilities and Equities Position (Source: DFIM, BB,2010)
Non-performing assets and provisioning
Non-performing assets (NPA) of NBFIs increased by 8.10 percent and reached BDT 10.54 billion as of end-December 2010. The NPA represented 19.52 percent of total capital. Provisions maintained against NPA showed a BDT 1.05 billion surplus over required provisions.
Chart 5: NBFIs NPA & provisioning trend (Source: Final Stability Report, BB, 2010)
|(B) PERFORMANCE & RATINGS OF NBFI|
On the test run basis of Basel-II on 1 January 2011 as a regulatory requirement, 80 percent of NBFI have been able to maintain required CAR of 10 percent as of end September 2011. The reason that NBFIs capitalization has seemed a bit worse than that under Basel-II is the fact that in the new framework NBFIs had to take into account three additional risks-credit risk and market risk- and operational risk- for determination of their capital adequacy.
Chart 6: Asset Share of NBFIs based on CAR in CY11 (Source: DFIM, BB,2010)
As on 30 September2011 the Capital Adequacy Ratio of the 11 company is grater than 10% which is good. They have enough adequate capital. 12 companies have Greater than 20% CAR, which could be treated as financial soundness of NBFI industry. Less then 5% CAR carried by 6 companies, which is bad indicator of the companies. According to the CAMEL rating matrix 8 companies rating is 1 or ‘strong’, 1 companies rating is 2 or satisfactory, 11 companies rating is 3 or fair and 9 companies rating is 5.
Out of total 29 NBFIs 14 FIs rating is 2 or ‘Satisfactory’ and rest of the 15 Fis rating is 3 or ‘Fair’. This means that NBFIs have their management soundness. Their financial position is good and their internal management control is satisfactory. According to the CAMEL rating matrix 14 companies rating is 2 or ‘satisfactory’ and 14 companies rating is 3 or ‘fair’.
Total classified loan and lease of the NBFIs are decreasing over the years. The chart showed the decreasing rate of the classified loan and lease out of the total loan and lease. In 2010 the rate is 5.92% which was in 2006 6.18%. In 2007 the rate is 7.05% this rate is highest among the 5 years. This trend shows the good performance of the industry.
Chart 7: NBFIs Total Classified Loan lease Trend (Source: DFIM, BB,2010)
Total loan and lease investment in different sector is tk. 18546.55 thousand by the NBFIs. The highest investment was done in Housing Sector by 19.04%.
Table 3: Sector-wise loans/Leases concentration (Source: DFIM, BB,CY10)
|Sector wise Investment|
% of Total
|Trade & Commerce|
|Garments & Knitwear|
|Jute & Jute Products|
|Food Production & Processing Industry|
|Leather & Leather Goods|
|Iron, Steel & Engineering|
|Pharmaceuticals & Chemicals|
|Cement 7 Allied Industry|
|Telecommunication & Information Technology|
|Paper, Printing & Packaging|
|Glass, Glassware & Ceramic Industry|
|Ship Manufacturing Industry|
|Electronics & Electrical Products|
|Power, Gas, Water & Sanitary Service|
|Transport & Aviation|
|Total Loans & Leases|
Earnings and Profitability:
NBFIs’ after-tax profits have shown continuous growth over the last five years. The Return on Equity (ROE) and the Return on Assets (ROA) ratios have also shown a positive trend over the last five years.
Chart 8: NBFIs ROA & ROE trend (Source: Final Stability Report, BB, 2010)
Aggregate ROA increased by 1.38 percentage points and ROE increased by 5.87 percentage points in CY10 compared with CY09. Better utilization of assets and equity results in the rising trend of these key ratios. A decomposition of the sources of total income shows that the dominant contribution is on account of interest income from traditional business, which lends to higher profitability. Expenses are increasing due to increasing staff and increasing outsourcing of business operations. However, if profits decline due to deterioration in asset quality, increase in provisions, etc., it will be a challenge to this sector to maintain its existing ROA and ROE level in future. According to the CAMEL rating matrix 3 companies rating is 1 or ‘strong’, 25 companies rating is 2 or ‘satisfactory’ and 1 companies rating is 3 or ‘fair’.
The NBFIs should have to maintain the SLR at 5% and CRR at 2.5% to increase risk avail power of the companies. The company who doesn’t take deposit from the public doesn’t have to maintain CRR and SLR at 2.5%. SABINCO and UAE maintain SLR only 2.5%. According to the CAMEL rating matrix 3 companies rating is 1 or ‘strong’, 6 companies rating is 2 or satisfactory and 20 companies rating is 3 or fair.
Composite CAMEL rating:
Composite CAMEL rating is done to rate the NBFIs according to their financial position. 2010 shows that the composite CAMEL rating of 14 NBFIs is 2 or ‘Satisfactory’ and rest 15 NBFIs rating is 3 or ‘Fair’ out of 29 NBFIs. On the other hand the last year 2009 CAMEL rating of 17 NBFIs is 2 or ‘Satisfactory’, 9 NBFIs rating is 3 or ‘Fair’ and rest 3 NBFIs rating is 4 or ‘Marginal’ out of 29 NBFIs. So it can be said that entire industry is improving.
NBFIs total lending deposit decreased by 0.53 times in 2010 from 1.75 times in 2009. The deposit equity ratio also decreased by 2.11 in 2010 from 2.75 in 2009. Equity asset ratio increased in 2010 from 2009 which is good for the industry. Investment in share & securities to total equity is decreased in 2010 from 2009. The NBFIs should have to increase more in capital market.
|Deposit Lending Ratio (times)|
|Deposit Equity Ratio (times)|
|Equity Asset Ratio %|
|Investment in Share & Securities to total Equity|
|Return on Asset Ratio %|
|Return on Equity Ratio %|
Table 4: Ratios of NBFIs in 2009 & 2010 (Source: DFIM, BB, 2010)
The ROA and ROE of the NBFIs increased in 2010 compared with 2009 that shows the good growth and profitability of the industry.
|(C) INVESTMENTS IN SHARE BY NBFI|
NBFIs can invest in share 25% of total assets according to the regulation. In 2010 total investments in share is 16939.79 million, which in 2009 was 13563.20 million. Investment in share comprises 6.37% of total assets. Profits of listed non-bank institutions grew a 166 per cent in the first half of 2010 from a year earlier, helped by booming share trading and diversified operations.
During January through June 2010, the publicly listed non-banking financial institutions (NBFIs) posted Tk. 4.5 billion in net profits, up from Tk 1.7 billion in the same period a year ago, according to the half-yearly reports. So we can see that the investment in share is increasing.
|(D) BOND AND SECURITIZATION|
The meeting pointed to the fact that Bangladesh’s bond market is in its earlier stage. A very few players with a limited number of instruments are operating in this market. So far 3 NBFIs have issued asset-backed Securities Bond amounting to Tk 170.50 crore. At the same time 5 NBFIs issued ‘zero coupons’ amounting to Tk 850 crore. 8500 million & 1705 million Zero coupon bond & Asset Backed securitized bond respectively have been issued by all NBFIs in December 2010.
|(E) LEGAL REFORM AND PRUDENTIAL REGULATIONS|
Capital adequacy of the NBFI:
Capital Adequacy ratio has to be 10% according to the BASEL Accord for Financial Institutions. Minimum paid up capital of the NBFI is BDT TK. 1.0 billion, to be complied by 30 June 2012. Total amount of paid up capital and reserve fund will not be less than the minimum capital based on risk weighted asset determined by Bangladesh Bank from time to time. The minimum capital requirement and the risk weighted assets for the NBFIs will be fixed through considering the overall performance of the sector.
Corporate governance in NBFI:
Bangladesh Bank gives emphasize on implementing corporate governance among the financial institutions and to do that, BB emphasizes implementation of the guidelines issued by it for improving corporate governance in financial sector. Good Corporate Governance practices enhance an entity’s corporate image and market credibility, which attract capital and increase its borrowing power. These can be reflected in the quality of financial reporting and disclosures; strength of internal control system and internal audit function; induction of professionally competent, independent non-executive Directors on corporate Board; formation of Audit Committee; delegation to executives and staff; protection of shareholder rights; redress of stakeholder complaint; etc.
Asset classification and provisioning:
Bangladesh Bank Guideline regarding Investment Classification: Investment shall be classified as follows:
According to Bangladesh Bank Guideline the financial institutions are required to keep provision as follows:
Provisioning: The provisions for classified investment should be as follows,
a. Un-classified: 1%
b. Sub-standard: 20%
c. Doubtful: 50%
d. Bad/loss: 100%
Provision shall be kept on Term loan/lease/home loan classified as bad/loss after deducting suspense interest/principle and appropriate security value from the suspense account.
Loan rescheduling policy:
The loan and lease are rescheduled according to the Financial Institutions rules 1994. Under there regulation the first reschedule of loan/lease is done by 15% on overdue or 10% on total outstanding which one is lower. Second reschedule of loan/lease is done by 30% on overdue or 20% on total outstanding which one is lower. Third reschedule of loan/lease is done by 50% on overdue or 30% on total outstanding which one is lower.
CRR and SLR:
NBFIs have to SLR at 5% of total liability and within that CRR should have to be maintained at the rate of 2.5% on total term loan. CRR should be maintained in the Bangladesh bank but SLR can be maintained anywhere the company wish to.
Schedule of charges:
NBFIs have to pay charges to the Bangladesh Bank according to the Regulation and Circular and Circular Letter. BB has formulated the “schedules of charges” on the basis of data, provided by the NBFIs earlier. The central bank has taken the latest move after detecting inconsistencies in the charges, fees and commissions against loans and services among the NBFIs, the BB official added.
Under the new provisions, the NBFIs will have to display the list of charges, fees and commissions against their leases and services in head offices as well as in the branch offices. Besides, the list of charges, fees and commissions will be published through their websites, according to the circular.
Core risk management:
The core risk management of NBFIs is (a) Asset liability risk (b) Credit risk (c) Internal control and compliance risk and (d) IT security risk. The central bank also circulated the guidelines to the NBFIs aiming to improve risk management, and establish minimum standards for segregation of duties and responsibilities. The failure to adequately manage these risks exposes financial institutions not only to business losses but also result in circumstances that they cannot remain in business. The NBFIs have not yet put in place a robust and structured framework for risk management in Bangladesh. But implementation of these guidelines will help the NBFIs to integrate with the global best practices.
Progress of BASEL Accord implementation in NBFI:
Basel-II accord is a unique risk management tool. To make the FIs capital more risk sensitive as well as to build the industry more shock absorbent and stable, Prudential Guidelines on Capital Adequacy and Market Discipline (CAMD) for Financial Institutions are issued which will come into force from January 01, 2012. The instructions regarding Minimum Capital Requirement, Supervisory Review Process and Disclosure Requirement as stated in the CAMD guidelines have to be followed by all FIs for the purpose of statutory compliance. These guidelines are issued by Bangladesh Bank with the authority vested under section 18(Chha) of the Financial Institutions Act, 1993.
Stress testing is essential to assess the potential risk of individual institutions. It is a simulation technique. The tests performed by measuring, monitoring and controlling various types of risk vital for ensuring the health of the NBFI as well as of the whole financial systems. It is used to determine the reaction of different NBFIs under a set of exceptional but plausible assumption through a series of tests. In order to further strengthen the country’s financial systems BB has issued a stress testing framework for NBFIs to proactively manage risks. The guideline focuses on simple sensitivity and scenario analysis.
|CHALLANGING ISSUES FOR NBFIs|
(a) Sources of Funds
NBFIs collect funds from a wide range of sources including financial instruments, loans from banks, financial institutions, insurance companies and international agencies as well as deposits from institutions and the public. Line of credit from banks constitutes the major portion of total funds for NBFIs. Deposit from public is another important source of fund for NBFIs, which has been increasing over the years. NBFIs are allowed to take deposits directly from the public as well as institutions. According to the central bank regulation, NBFIs has the restriction to collect public deposits for less than one year, which creates uneven competition with banks as banks are also exploring the business opportunities created by NBFIs with their lower cost of fund. Although recent reduction of the minimum tenure of the term deposit from one year to six months for institutional investor has had a positive impact on their deposit mobilization capacity. NBFIs can develop attractive term deposit products of different maturities to have access to public deposits as these are one significant source of their funds.
Although share capital is another prospective source of fund for NBFIs, many companies have not utilized this opportunity fully. As all NBFIs are incorporated as public limited companies, it could be a better alternative for them to raise fund through initial public offerings in order to finance the expanding horizon of activities.
(b) Cost of Fund
Cost of fund is an important factor to maintain profitability, financial strength and stability of banks and NBFIs. NBFIs face too many problems including competition with the banks that have a lower rate of cost of fund. The NBFIs have to borrow fund from the banks with higher rate of interest to meet fund requirements for their investments. As the banks have a great opportunity of taking interest-free or lower-rated deposits, the weighted average cost of fund (WACF) of banks can be minimized. But the NBFIs are not allowed to take public deposit by way of current or savings account. In spite of the higher rate of interest of the NBFs, the entrepreneurs prefer loan or lease or other financial services and facilities than banks because of the dynamic, need-base, and quick services as well as the collateral-free financial services provided by them.
(c) Asset-Liability Mismatch
Asset-liability mismatch is another cause of concern for NBFIs. Demand for funds to meet the increasing lending requirements has increased many times. But the availability of funds has become inadequate as NBFIs are mostly dependent on loan from commercial banks. International Finance Corporation (1996) observed that leasing companies are in a great dilemma while managing the mismatch between their asset and liability. According to IFC, the average weighted life of the company’s business portfolio should be less than the average weighted life of its deposits and borrowing in its operating guidelines for a leasing company.
(d) Investment in High Risk Portfolio
It is already mentioned that cost of funds for NBFIs are higher than that of banks. In order to sustain the high cost of borrowing, NBFIs may be inclined to invest in the high return segments, which can expose them to commensurately higher risks. Moreover, fierce competition among competitors may also force many NBFIs to reduce the margin at the expense of quality of the asset portfolio. This strategy may eventually create the possibility of an increase in the non-performing accounts. Unless adequate risk management capabilities are developed, the growth prospects of NBFIs would not only be hindered but it might also be misapprehended
(e) Product Diversification
NBFIs emerged primarily to fill in the gaps in the supply of financial services which were not generally provided by the banking sector, and also to complement the banking sector in meeting the financing requirements of the evolving economy. NBFIs are permitted to undertake a wide array of activities and should therefore not confine themselves to a limited number of products only. Leasing, no doubt, presents a good alternative form of term financing. Even in leasing, investments were not always made in the real sector and non-conventional manufacturing sector. Almost all the leasing companies concentrated on equipment leases to BMRE (Balancing, Modernization, Replacement and Expansion) units only. New industrial units were hardly brought under the purview of leasing facilities. This implies that the new customer base has not been created and the growth of industrial entrepreneurship could not be facilitated through NBFI financing packages. Diversifying the product range is a strategic challenge for NBFIs in order to become competitive in the rapidly growing market.
(f) Lack of Human Resource
Skilled and trained human resource is considered as an important component for the development of any institution. Due to the recent growth of NBFIs, availability of experienced manpower is a challenge for this industry. The supply shortage of efficient resource personnel has been leading to a significant increase in the compensation package, which is also a cause of concern for NBFIs. The industry experts believe that although there exist enormous growth opportunity the market is still quite small and scope of work for skilled personnel is very limited compared to that of banks. This makes the competent personnel to switch from NBFIs to other institutions after a certain period implying low retention rate of skilled human resource.
(g) Weak Legal System
Although the default culture has not yet infected NBFIs to any major extent, they face difficulties in recovering the leased assets in case of a default. Moreover delays in court procedures create another cause of concern. The situation cannot be improved only by making the legal system stronger through enactment of new laws rather ensuring proper implementation existing ones is more of concern.
|DEVELOPMENT OF THE CAPITAL MARKET AND THE NBFI|
The essence of a market based financial system is the well-organized and efficient capital market. The stock market is the first and foremost forum in which individuals can trade risk and return, firms can raise capital and stockholders can maximize the value of their shares. At present, the worldwide capital market provides an excellent mechanism for mobilizing savings for industrialization. Through the efficient pricing of the shares in the market, the wealth of the company is maximized and individuals get prize for their sacrifice of present consumption. On the other hand, primary market gives the opportunity to the firms to generate capital from the public and also provides individuals participation in the firms’ ownership. The development of the secondary market for equity does not contradict with the development of the banking sector.
In many countries of the world especially the countries of the continental Europe and Japan have started their reforms based on bank-dominated system first. So a full pledged reform program of financial sector includes the development of both bank and non-bank financial institutions in the financial system so that the overall savings and investment activities improve significantly. Non bank financial institutions are permitted to work as merchant banker. In this situation, they have to take a separate license from the Securities and Exchange Commissions (SEC). Merchant banking activities involves activities like a manager of the issue, underwriter, bridge financer and portfolio manager etc. NBFIs can venture in such types of risky businesses because of their particular types of sources of fund, which facilitate them to provide institutional support to the capital market. On the other hand, bank’s money is the depositors money and so that they go for less risky short term financing. For this reason banks are subject to high regulations and NBFIs are little or no regulations around the world and thereby can go easily for risky investment such as merchant banking, venture capital etc. NBFIs are not permitted to use ‘bank’ in their names and use companies. Their funding is not covered by the government protection. These distinct natures make the NBFIs separate from the BFIs and place a separate arena in the financial market place.
So, capital market development needs the simultaneous development of associate institutions like NBFIs. NBFIs capture the second position in the world capital market in volume in the early 90s. NBFIs activities in this market involves investment and merchant banking , including the portfolio management, issue managing, underwriting and bridge financing, consultancy or advisory services, selling of financial data, corporate agents in merger and acquisition, investment counseling et. NBFIs are required to take a separate license from the SEC to do the activities related to the capital market. In our country, 21 NBFIs out of 29 NBFIs are listed in the capital market. Among them, Prime Finance have the largest investment in 2010 which is 289.58 crore, Lanka Bangla Finance invest 128.24 crore and SABINCO invest 112.91 crore (BB, 2010).
|IMPACT OF NBFIs DEPOSIT MOBILIZATION ON THE MONITARY POLICY|
Every year monetary and credit policy is formulated with a view to attaining some definite objectives. Major sources of funds of NBFIs are Term Deposit, Credit Facility from Banks and other NBFIs, Call Money as well as Bond and Securitization. NBFIs are allowed to mobilize term deposit only of tenor not less than six months. At present term liabilities are subject to a statutory liquidity requirement (SLR) of 5 percent inclusive of average 2.5 percent cash reserve ratio (CRR). SLR for the NBFIs operating without taking term deposit is 2.5 percent. In the same way, now NBFI is account of the overall credit participation. NBFIs credit and deposit are increasing day by day and they are accounted for effective monetary and credit management of the country.
|THE PHENOMENON OF LONG TERM FINANCING AND THE ANALYSIS OF NBFIs PERFORMANCE IN TERM FINANCING|
One important arena of NBFIs is the deployment of funds in the long term financing. By definition, banking financial institutions should not involve in the long term financing and they are the institutions related to the money market instruments and allowed to make only fully collateral short term lending. Bank business is based on the depositors’ money. Lending long is risky because it creates least accountability to the borrowers. Borrowing short and lending long by the BFIs create a mismatch in the financial system and hamper the macroeconomic stability. Time lag between lending and borrowing of the commercial banks has leaded a maturity mismatch as there is about 10 months average maturity gap between the deposit fund and loan portfolio (BB, FID). Again the interest rate charged by banks does not cover the total cost of funds. Before 1990, there was direct monetary control and the central bank administered the interest rate for both deposit and credit. After that although interest rates were not controlled by the central bank, commercial banks did not have such professionally –expert personnel to assess the lending risk. Banking sector in Bangladesh felt a lack of basic expertise, which was needed for the market-oriented approaches. In the same way performance of the two public Development Financial Institutions (DFIs) namely BSB and BSRS are very unsatisfactory as their non-performing loan is over 50% for the last several years. This issue demanded for a sustainable basis for long term financing which is a major part of the NBFIs business by nature. However, in Bangladesh, the BFIs are still the principal sources of long term financing, accounted to about 70-80% term loan disbursement (BB, FID). Before 80s, there was no alternative mode of long term lending other than the BFIs. So BFIs were in a tremendous pressure to provide long term financing for industrialization of the country. After 80s, there was consensus among the government policymakers and international bodies to search an alternative source. Subsequently, NBFIs have started to emerge in the financial system of Bangladesh.
Industrial Term Loans of Banks and Financial Institutions
The disbursement of industrial term loans by banks and financial institutions increased by 29.5 percent to Taka 258.7 billion. The recoveries also increased by 16.5 percent to Taka 189.8 billion in FY10. The outstanding balance showed a positive growth of 18.3 percent as of end June 2010. However, the overdue decreased by 3.2 percent in FY10 and as a percent of outstanding also declined to 11.4 as of end June 2010. 6.28 The four SCBs and five state-owned specialized banks together had Taka 137.6 billion (24.3 percent) shares of the total Taka 565.5 billion outstanding loans as of end June 2010, Sectoral share of total advances making them major players in industrial term lending. However, with very high levels of overdue loans, their actual role in current lending is quite minor, they disbursed only Taka 19.3 billion (7.5 percent) out of total Taka 258.7 billion in FY10. Of the total disbursement, private commercial banks were the major share holders (Taka 203.9 billion) in FY10, followed by financial institutions (Taka 28.6 billion), SCBs (13.4 billion), foreign banks (Taka 6.9 billion) and state-owned five specialized bank (Taka 5.9 billion). 6.29 The foreign banks had very low overdue loans (2.1 percent) as of end June 2010. These were low also for financial institutions and private commercial banks (6.5 percent). Overdue loans of the SCBs and the state-owned specialized banks were very high (27.8 percent and 24.5 percent) respectively as of end June 2010. 6.30 Since BKB and RAKUB are agriculture sector lenders, they have insignificant role in industrial term lending. The specialized industrial sector lenders with extremely high overdue have concentrated in the recent years on recovery rather than fresh term lending (Annual report, BB, 2010).
|NBFIs PERFORMANCE IN LEASING|
In order to ensure flow of term loans and to meet the credit gap, development of NBFIs is a compelling necessity for the economy. Although NBFIs have immense necessity and greater importance in the financial system of Bangladesh, they are severely suffering from some problems including the fund problem in terms of both availability and cost. The major business of most financial institutions (non-bank) in Bangladesh is leasing and term loans extended to various. The leasing sector, a vital segment of financial sector has contributed significantly over the year, in spite of many constrains like tremendous competition with the banking sector of the country, challenges and regulatory changes which are affecting adversely on the business.
At present there are 21 leasing companies operating under license of Bangladesh Bank. The lease financing practices in Bangladesh have grown significantly within last few years. Competition among the leasing companies has grown stronger with the growth of the NBFIs, besides entrance of commercial banks in the lease financing market who have the advantage of lower costs of fund compared to the NBFIs. Among 21 leasing companies 17 are listed with the capital market.
A main product of NBFIs is lease financing and the NBFIs became very popular as leasing companies for this product. This product was very popular as a good solution to the requirement of capital machinery, working capital as well as income tax benefit for both the lessee and lessor. Depreciation allowance on lease assets was withdrawn by the Finance Ordinance 2007 which affected the leasing industries, reduced the import of new machinery in Bangladesh and became a heavy tax burden for NBFIs along with global financial crises. To maintain sustainable condition and promotion of NBFIs, it is necessary to re-introduce depreciation allowance on lease assets for NBFIs by the Finance Act 2009 and reduce the corporate income tax rate at 35 percent from the existing 45 percent (Rbiul Islam, 2009).
Leasing companies as NBFIs are facing some difficulties in raising their fund and operating business. Leasing Companies have to collect fund from the commercial banks at a very high rate of interest. Moreover they are to provide high & expensive collateral for this. They are not interested to raising fund from capital market as our capital market is not efficient. Moreover taking long term foreign currency loan are not welcome because of a number of rules and conditions.
Competition among the leasing industries has been intensified and this competition in leasing business does not come only from the NBFIs but also from BFIs. Many commercial banks and other financial institutions like ICB (Investment Corporation of Bangladesh) are participating in the leasing business. The commercial banks are doing lease business as EZARA under Section 7 DA (4) of the Bank Companies Act 1991. Commercial banks are also taking advantage of their low costs of fund than the leasing companies.
(a) Exploring Alternative Sources of Funds
The finance and leasing companies across the world are using different sources for collecting funds. NBFIs in Bangladesh may also explore the possibilities of gaining access to new sources of funds like issuance of commercial paper and discounting or sale of lease receivables. However, in releasing such new products, some regulatory changes have to be made. Another innovative and promising source of funds may be the securitization of assets and factoring. In this connection, IPDC launched first asset backed securities in 2004 as an alternative source of funding. This new instrument emerged as an important tool and added a new dimension in the financial market.
(b) Competition and Product Diversification
NBFIs in Bangladesh are operating in a highly competitive environment. The competition for NBFIs is even more challenging as they have to compete with banks. Given the changes in the business environment, the need for product diversification is very important. At present, lease financing constitutes 25.21 percent of the total loan and lease investment of NBFIs, which is decreasing compare to the last year. The remaining part concentrates mainly on term financing and housing finance. Some of NBFIs are primarily engaged in leasing, some are also diversifying into other lines of business like merchant banking, equity financing etc. Currently, 22 NBFIs (out of 29) specialize in lease financing (DFIM, 2010). NBFIs are permitted to undertake a wide array of activities and therefore should not confine themselves to one or two types of product only. Leasing, no doubt, presents a good alternative form of term financing but NBFIs should also venture into diversified use of their funds such as merchant banking, venture capital financing, factoring, securitization, forfeiting etc. for a healthy growth of the capital market.
(c) Enhancing Capital Market Activities
NBFIs around the world carry out a significant role in the development of the capital market. Strong institutional support is necessary for a vibrant capital market which is the core of economic development in any market based economic system. NBFIs through their merchant banking wing can act in this regard. A total of 30 companies are now listed as merchant banks in Bangladesh, of which 23 are full-fledged, 6 are issue managers, and only one is a portfolio manager. Active participation of merchant banks is essential to accelerate the capital market activities which can expedite the economic growth of the country. The success of merchant banking operations is largely linked to the development of the security market. So NBFIs should concentrate more on their opportunities in the capital market.
(d) Issues of Taxation
The financing mode of lending and leasing are totally different from one another. The concept and procedure particularly the accounting and taxation system are also quite different. So it is advisable not to mix up the two different operations, otherwise it might distort the basic financial norms. As the tax treatment is totally different in leasing business, mixing up of lending and leasing in the same business portfolio might create the possibility of tax evasion.
Emergence of NBFIs has created a new avenue in our bank dominance traditional financial system. Long term lending of banks is mostly unfamiliar product for them, and has created a serious distortion in the financial market. Rather than gaining any benefit from such types of activities, the society is now carrying the load of overwhelming default loans. As leasing is considered as an alternative of long term financing many NBFIs have strong performance in leasing business. NBFIs have to be equipped with highly professional personnel and technological advancement to chase the future opportunities and competition as well. Strong institutional support is necessary for the development of capital market which is the core of economic development in the market economic system. NBFIs around the world provide institutions support to the capital market. In Bangladesh, now 21 NBFIs are registered with the SEC and they should concentrate more on their activities in the capital market.
NBFIs are suffering from high cost and scarcity of funds. At present, with high cost of fund non-banks are forced to compete with the banks those have relatively low cost of fund. This situation somewhat hampers the growth and development of NBFIs. For rapid growth and development of this sector, fund problem should be solved on a priority basis. Opening of a refinancing window even for a limited period of time may be considered after a strategic evaluation. Banking has the multifaceted own activities so that for bringing more efficiency in their own efficiency as well as the efficiency of the financial system they should not be involved with the activities that the NBFIs can do. It is recommended that government and the central bank will take initiatives to ease the fund constraint of NBFIs so that they can minimize their cost of fund and to bring their cost of fund at a market level. NBFIs from their part shall be much more attentive in rigorous project analysis to perform the loans well. A modern and dynamic regulatory framework is required for the rapid and effective development of NBFIs. Bangladesh Bank has formulated and declared policies for classifying and provisioning of investment resources of NBFIs in June 2000. The classification rule has been formulated with a view to judging quality of investment funds, strengthening discipline in lending and recovery, securing peoples’ deposit, having provisions for the loss of unrecoverable invested funds and imposing interest against bad investment. This classification procedure will definitely improve and promote the activities of NBFIs, but the procedure is always subject to improvement with the diversification of products of NBFIs. Secondary bond market growth of NBFI is much better than the banks. This is a positive sign for the NBFIs. BB now establishes the Basel Accord for the NBFIs which will ensure more clarity of NBFIs reporting. NBFIS should have to maintain the minimum requirement of the capital adequacy ratio which is now 10%. It will strengthen the financial position of the NBFIs.
There are many problems in the development process of NBFIs and consequently strengthening the financial system of Bangladesh. It is now well established that NBFIs can contribute much in strengthening the financial system as well as in the process of economic development of the country. Since inception in 1986, NBFIs are some-what successful to draw attention of the people and establish its importance in the financial sector as well as in the economy of Bangladesh. The business growth of the NBFI and their performance and rating is improving every year, which shows the positive sign for this industry. It is hoped that in future NBFIs would be able to play more significant role in the development of economy of Bangladesh.
Banks and Non-Bank Financial Institutions are both key elements of a sound and stable financial system. Banks usually dominate the financial system in most countries because businesses, households and the public sector all rely on the banking system for a wide range of financial products to meet their financial needs. However, by providing additional and alternative financial services, NBFIs have already gained considerable popularity both in developed and developing countries. In one hand these institutions help to facilitate long-term investment and financing, which is often a challenge to the banking sector and on the other; the growth of NBFIs widens the range of products available for individuals and institutions with resources to invest. Through their operation NBFIs can mobilize long-term funds necessary for the development of equity and corporate debt markets, leasing, factoring and venture capital.
Bangladesh Bank (BB), Financial Institutions Department (FID)
Non Bank Financial Institutions (NBFIs), Annual Reports (ARs), Financial Reports (FRs) 2010.
Progress and Prospects of Non Banking Financial Institutions in Bangladesh, Bank Parikrama, September 2011.
Brigham, E. F. and Houston, J. F. (ed) (2007-2008) Fundamental of Financial Management, South-Western: ISE.
Block, S. B. and Hirt, G. A. (ed) (2005-2006) Foundations of Financial Management, Irwin: McGraw-Hill.
Fraser, L. M. and Ormiston, A. (ed) (2006) Understanding Financial Statement, New Delhi: Prentice Hall of India.
Hossain, M and Shahiduzzaman, M. (2002) Development of Non-Bank Financial Institutions.
NBFIs’ minimum paid-up capital. Available From: <www. news.priyo.com> [Accessed: 20th December 2011]
Bangladesh Economy 2011. Available From: <www.theodora.com> [Accessed: 13th October 2011]
First-half profits of listed NBFIs record robust growth. Available From: <www.dailystar.net.com> [Accessed: 16th December 2011]
Azad, K. A. (2010) Banglapedia, Non-bank Financial Institutions.
Financial Stability Report 2010, Bangladesh Bank.
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