SCBs won't be allowed to float shares now

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FE Report
Banks in the country should go for merger to become strong, or else it would be difficult for them to survive under stiff competition in the future, said finance minister AMA Muhith on Sunday.
"They can survive in 2010, but in 2015 when the financial sector will be opened, it will be difficult for them to survive," he said at a press briefing after meeting with the officials of Bangladesh Bank and three state-owned commercial banks (SCBs).
The country does not have merger culture as the business is less mature, but it is popular in other countries, ther minister said.
The finance minister rejected outright the idea of floating shares of the SCBs on the capital market now.
"We are not going to allow any SCB to float share right now as their financial barometres are not strong," he said.
The government has to provide funds for their capitalisation and in this situation it would not be wise to float their shares, he added.
"The SCBs will float shares when they become strong banks," Mr Muhith said after a meeting with the officials of the central bank and three SCBs.
Bangladesh Bank (BB) and the three SCBs - Sonali, Janata and Agrani - are going to have a separate pay scale and they are asked to submit the new pay structure, after being approved by their boards, to the government, he said.
"It has been formalised that their perks and pay-structure will be different from that of the national pay scale," Mr Muhith said.
"The central bank will submit one proposal and the SCBs will submit another proposal along with business plans," he added.
They will need additional money to pay more and they have to earn the amount through doing better business, the finance minister said adding, "The full pay package may be implemented in phases."
The minister said it is not a good structure, under which the top executive gets Tk 0.8 million and the second top gets Tk 40,000 and it should be revised.
The SCBs need to restructure themselves as the private sector banks are overtaking them in terms of doing business, he said adding, "Over 60 per cent of the country's financial sector is controlled by the private sector banks and the SCBs need to pay more to their officials to stay competitive."
About the formation of new banking division, he said there are 48 scheduled banks, many insurance and non-banking financial institutions and the capital market and the ministry should have a separate division to look after banking.
"The independence of the central bank will not be affected due to the formation of the new division," Mr Muhith said.
The division will enquire about the allegations it receives from different sources, he added.
The minister is upbeat that the economy is performing well and the country is expected to achieve 6 per cent growth rate.
"Capital machinery import is picking up and the export is rebounding. We expect to reach the revenue target by the end of the fiscal year," he said.
There is a change in the investment scenario and the businessmen are getting back confidence, the minister said.
Implementation of the annual development programme (ADP) in the first six months is 28 per cent, while it was 23 per cent in the same period of the last fiscal year, he added.
"One must keep this in mind, there is a big gap in absolute terms between 23 per cent of the Tk 265 billion ADP and 28 per cent of Tk 305 billion ADP," he pointed out.
Inflation is expected to be within the limit of 6.5 per cent as oil price is steady and prices of other commodities did not increase much in the international market, Mr Muhith said.
"Food production last year is quite satisfactory and we are expected to have a good harvest of wheat and boro crops," he said.
The inflation figure is still below the limit and the government is going to revise the figure, he added.
The minister brushed aside the International Monetary Fund (IMF) assessment that there will be double-digit inflation in the current fiscal.
"We don't accept it at all," he said.
The government has already started the budget-making process and is discussing the next budget formulation at different levels, he added.
"I am expected to place the first quarter report before parliament on January 19 and if the session continues till mid-February, I am going to submit the second quarter report in the current session," he said.
The finance minister under the Financial Accountability Act is obliged to submit the report of the economy every three months.
"The revised budget will be placed in the next parliament session, which will begin in March," he added.
The government is planning to set up an expatriate welfare bank, the minister said.
"We have formed a committee headed by the Secretary of the Expatriate Welfare and Overseas Employment Ministry to find out the nitty-gritty of the bank," he added.
The government has several options and the bank can be a scheduled one or a specialised one and the government will take the final decision after it gets the report from the committee, Mr Muhith said.