Bangladesh Bank has rejected an application of IFIC Bank Ltd to purchase a loss making exchange house in United States for US$ 3 million.
IFIC Bank Ltd submitted the application to the central bank on November 6, 2016 requesting to allow it to purchase a US-based exchange house namely Sunman Global Express Corporation.
The bank in its application said that it wanted to purchase 100 per cent shares worth US$ 3 million of the exchange house to expand its business to United States.
A BB official told New Age on Tuesday that it was not logical that any bank would purchase such type of a loss-making exchange house by spending US$ 3 million or Tk 24 crore.
The IFIC Bank in its application said that the exchange house had taken licence in 1998 from NYS Department of Financial Services of US and it had earlier operated business namely Rupali Exchange Inc.
The exchange house, however, changed its name to Sunman Global Express Corporation (SGEC) in 2014.
The SGEC is now operating its business through four branches and appointing 23 agents in US.
IFIC Bank said that it was a difficult task for the bank to collect a licence from NYS Department of Financial Services to open an exchange house in US.
The SGEC has become a well-reputed financial institution and it is also doing business in West Africa by earning profit.
IFIC Bank also submitted the financial statements of the SGEC.
The financial statement showed that SGEC had faced loss in 2014, 2015 and 2016 in a row resulting that its cumulative loss increased significantly.
Under the circumstance, the earnings of the exchange house plunged into a negative zone which stood at US$ 11.33 lakh.
IFIC Bank, however, in its application said that it would purchase the exchange house with local currency Taka as the owner of the institution was an expatriate Bangladeshi businessperson.
The BB official said that the expatriate Bangladeshi businessperson would finally remit the currency to US which would put an adverse impact on the country’s current account balance.
IFIC Bank is also not allowed to purchase any exchange house abroad in line with the central bank guidelines.
The banks, which achieved 2 or satisfactory-mark in the CAMELS rating of the central bank, will be able to purchase exchange houses abroad.
The banks have to achieve strong or 1 position in capital adequacy and asset quality to purchase any exchange house abroad.
But CAMELS rating of IFIC Bank is now 3 or fair and its rating of capital adequacy and asset quality also stands at 3.
For this reason, IFIC Bank has no financial ability to purchase share of an institution abroad in accordance with the bank’s financial indicators.
The central bank denied the IFIC Bank’s application on December 22, 2016 considering the points.
IFIC Bank deputy managing director Shah Md Moinuddin told New Age on Thursday that the central bank had denied his bank’s application to purchase the exchange house.
He said, ‘We have informed the central bank that our bank will settle the purchasing process through local currency in the country.’
Despite the request, the central bank did not accept the application, he said.
‘IFIC Bank may resend the application to the central bank for a review of its decision. The board of directors of the bank will decide in this regard,’ he said.
The BB official said that four Bangladeshi banks were now operating exchange houses while 38 banks completed 225 drawing arrangements with the financial institutions of US.
So, it is not essential to purchase new exchange houses in US to boost the inflow of inward remittances, he said.
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