The central bank mulls over introducing electronic money-better known as e-currency-on a pilot basis in the process of digitization of Bangladesh.
Saying adieu to paper currency and metal coin is a brainchild of the Governor of Bangladesh Bank (BB), as the world is on a transition into IT-based knowledge economy.
"This is my dream. We're thinking about introducing e-currency in Bangladesh in the near future on a pilot basis," said Dr Atiur Rahman said in an exclusive interview with the FE recently.
"The mobile financial services will be boosted further if we can do this," added the BB governor.
As part of the move, the central bank hopes to convert a portion of normal currency to electronic one to reduce the printing cost as well as facilitating the digitization.
E-currency is money that is exchanged on the computer and the mobile phone.
Using e-currency, customers can pay bills, change money from one account to another, and pay for things they want to buy, such as food and household products.
"We're also working to bring all banks and non-banking financial institutions (NBFIs) in a single electronic network to oversee their overall functions instantly," Dr Rahman explained.
The central bank has already launched a 'dashboard' for monitoring all kinds of foreign-exchange transactions. It provides summary of export, import, inland back-to-back letter of credit (LC), and inward and outward remittances separately.
The 'dashboard' and the Integrated Supervision System (ISS) are in place in the central bank to monitor all banking operations at the branch level digitally.
"Any irregularity shown in either of the dashboards warrants immediate interventions by the relevant examiners. Bankers are, therefore, kept on their toes and have become extremely cautious about due diligence in their operations," the BB governor said.
He also said: "Our monitoring using 'dashboard' has helped increase the level of accountability and transparency in the country's financial system."
The central bank has also been able to encourage the banks and NBFIs to improve their own internal controls and compliance for checking fraud and forgery in the country's banking sector, the central bank chief explained.
"We've already reorganized our supervision system by placing one focal point for each bank that provides all information of that bank," the BB governor said in reply to a query.
"It helped improve the quality of our supervision and monitoring."
The BB governor sees no major problem in the banking sector right now, excepting political crises.
He earnestly requested the political parties to resolve the ongoing political impasse immediately for the sake of the economy. He hopes peace and calm will return soon.
He said the central bank is now implementing a cautious monetary policy stance for the second half (H2) of the ongoing fiscal year (FY) 2014-15 with an aim to maximise economic growth by curbing inflationary pressure on the economy.
He also said the BB will endeavour to reduce the spread and thus lending rates to boost investment.
The central bank kept enough space for the expansion of credits to the private sector, which is the main driving force of the economy, he added.
The ceiling for private-sector-credit growth remained unchanged at 15.5 per cent for the H2 of FY'15 while public sector, including government, it is re-fixed at 25.3 per cent from 24.8 per cent earlier, according to the current monetary policy statement (MPS).
"We're ready to increase the ceiling of private-sector-credit growth in line with requirement," Dr Rahman noted.
Although inflation is currently at a tolerable level of 6.87 per cent, the BB will continue its efforts to bring it down to 6.5 per cent by the end of June 2015,
according to the governor.
He also hoped that the MPS for the H2 of FY'15 would play the same effective role as the previous one in instilling and strengthening public confidence in the BB's actions aimed at containing and stabilising the inflation.
About exchange-rate policy, the BB governor said exchange rate stability will continue to stay in place and hence a sound amount of foreign-currency reserves will be maintained.
And they would continue their efforts to reduce the volume of non-performing loans (NPLs) for improving the financial health of the banks.
The amount of NPLs fell by more than 12 per cent to Tk 501.56 billion in the fourth quarter (Q4) of the last calendar year from Tk 572.91 billion in the preceding quarter.
During the Q4, the share of such dud money in the total outstanding loans of the banking system came down to 9.69 per cent from 11.60 per cent in the previous quarter.
The improvement is attributed to close monitoring and supervision by the central bank.
The BB is working to expedite its ongoing financial-inclusion programmes through strengthening digitization, school banking and empowering women for achieving sustainable economic growth.
Governor Dr Atiur said the BB has already launched multifarious initiatives to fully digitize the financial sector. These include Bangladesh Automated Clearing House (BACH), National Payment Switch of Bangladesh (NPSB), Online Credit Information and Supervisory Reporting, and Mobile Financial Service (MFS).
"The mobile banking activities have become highly popular in Bangladesh. The growth of such transaction has increased rapidly," he noted.
More than 25.25 million people have opened accounts so far to avail the MFS, which is growing day by day, according to the central banker.
The banks are providing MFS to their clients through 0.54 million agents across the country. The average daily transactions now amount to about Tk 3.50 billion.
"Our policy priorities of inclusive, sustainable financing rest on three broad fronts of agriculture, SME and green financing with a view to enhancing income and employment generation through narrowing down inequality in advancement opportunities," Dr Rahman explained.
He also said the central bank is now working to bring street children into the traditional banking channel aiming to prevent their derailment through developing their financial position.
About 7.4 million children aged 5-17 are estimated to work to support their families, or simply to survive in Bangladesh. Some of them return home at night while others live full-time on the streets.
In Bangladesh, children aged 14 and above are legally permitted to engage in non-hazardous work.
"They all need bank accounts. I hope the banks will provide the same with the help of non-governmental organisations (NGOs) working for them," Dr Rahman said.
Earlier on February 8 last, the BB asked all banks and financial institutions to set up separate units at their head offices to serve women entrepreneurs effectively.
"Women entrepreneurship development is one of the important dimensions of the inclusive policy," the governor said.
He also said engaging women in economic activity by providing enhanced access to financial services is the key target.
"No-frill accounts for farmers, itinerant wage labourers and other individuals of meagre means, for street children and for schoolchildren are building new base of inclusive growth," the governor noted about their banking philosophy.
Around 1.5 million '10-taka accounts' have been opened so far to distribute financial aid to social-security-programme beneficiaries, hardcore poor, freedom fighters and destitute beneficiaries under Hindu Welfare Trust.
On the other hand, schoolchildren have opened around 0.85 million bank accounts so far across the country, depositing more than Tk 7.0 billion into such accounts.
Dr Rahman also said Bangladesh's approach of internalizing inclusive, green financing within the framework of traditional stability-focused monetary and financial polices have started attracting external attention.
Financial Times-owned magazine The Banker has recently awarded the BB governor as the 'Best Central Bank Governor' award 2015 from the Asia-Pacific region for his contribution to the successful maintenance of macroeconomic stability in the country.
The United Kingdom-based prestigious financial magazine had selected Dr Rahman for the award in recognition of his role in promoting socially responsible financing, financing inclusiveness and green funding.
In November last year, the BB governor received the "GUSI Peace Prize International 2014" award for his contribution to establishing peace by reducing poverty in Bangladesh.
Dr Rahman also received the prestigious "Indira Gandhi Gold Plaque for 2011" for his contribution to international cooperation towards human progress.
He was appointed 10th governor of Bangladesh Bank on May 1, 2009 for a four-year term, which was extended last year for another term.
Ever since assuming office as central bank governor in 2009, Dr Rahman has been spearheading initiatives of ingraining in the Bangladesh financial sector socially and environmentally responsible financing ethos, with multi-pronged facilitation and policy support for inclusive, green financing.
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