BB opposes proposal to allow PKB for commercial banking

Bangladesh Bank (BB) has rejected a proposal of finance minister AMA Muhith on giving Probashi Kallayan Bank approval to open exchange houses abroad and allowing it to operate partial commercial banking activities to enable the bank serve the Bangladeshi diaspora.

The central bank in its opinion said the specialised bank does not comply with the mandatory standards stipulated in the banking company act on matters like capital requirement and banking nature to become eligible for commercial banking and banking through exchange houses.

The BB last week in a letter to finance ministry cleared its position that cited specific provisions lying in the bank company act on specific issues, a source in the finance ministry said, reports the New Age.

bbMuhith backed the longstanding demand of the bank to enable it to provides optimum services to Bangladeshi diaspora through opening exchange houses abroad.

The existing rules of BB stipulate only commercial banks or branches of any specialised banks having approvals from the central bank to operate commercial transactions though their particular branches could only get permission to open exchange house.

‘We are barred to clear our cheques from Bangladeshi diasporas due to lack of our own exchange houses and thus not for becoming member of BB’s clearing house,’ PKB managing director and Chief Executive Officer CM Koyes Sami told New Age.

Muhith asked BB in November to allow the principal branch of PKB to pursue all types of commercial banking activities and allow the bank to open exchange houses as the bank has been handicapped to cater to the needs of the migrant workers fully due to its specialised nature.

However, BB in its letter to finance ministry said doing commercial banking activities and opening exchange houses beyond the territory of the country by any banking company requires obtaining banking license from the central bank and getting registered under the company act 1994.

To become eligible under the scanners of BB and company act 1994, a bank must have a capital base of Tk 400 crore, the BB elaborated further.

The paid-up capital of PKB is now at Tk 100 crore.

Asked, a senior BB official said BB is an autonomous organisation to formulate monetary policy and govern entire banking sector of the country.

The PKB, established in April 2011 by a cabinet decision, is supposed to cater to the needs of migrant workers—providing them low-cost loans to bear the migration related costs, rehabilitating the workers in case of their retrenchments in their foreign outstations and repatriating their remittances—has so far failed due to lack of policy supports, a top banker said.

Currently, the PKB offers loans at only nine per cent interest to outbound migrant workers.

As of November this year, the PKB has established 27 branches across the country, while it extended low-cost loans to 1,600 migrant workers to bear a lion’s share of their migration costs.