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New banks spend more on CSR to avoid tax

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FT ONLINE

New banks are found to be spending an excessive amount of money in the name of Corporate Social Responsibility (CSR) to avoid taxation, according to a study.

For some banks, it was noticed that this spending was 205% of their previous year’s net profit.

A Bangladesh Institute of Bank Management study revealed the fact at a seminar titled “An evaluation of the performance of new commercial banks” held at BIBM auditorium in the city on Thursday.

The study was carried out by a four-member BIBM team led by its Associate Professor Sohail Mustafa.

As per the Bangladesh Bank guidelines, banks are allowed to spend 10% of their net profit on CSR fund, but the report found that NRB Global Bank spent 205% in 2016, which was unusual.

In 2015, Union Bank spent 99%, Midland Bank 92% and NRB Global Bank 35%. In 2014, NRB Global spent 49%, NRB Commercial 37% and Union Bank 15%.

The report said basically, the banks went on excessive expenditure in the name of CSR with a view to getting an exemption from tax.

SK Sur Chowdhury, deputy governor, Bangladesh Bank, was present at the seminar as the chief guest.

He said among the nine new commercial banks, two-three of them are in deplorable condition and the central bank is watching them.

Former deputy governor of Bangladesh Bank Khondkar Ibrahim Khaled, also BIBM chair prof, said the default loan of the new banks is comparatively very low, so there is nothing to be worried about.

“If we compare the amount of their default loans with that of Basic Bank, which has 60% default loan, we will find that the new banks have only a meagre of 1% default loan.”

He also suggested providing opportunity for the new banks so they can grow well enough, Ibrahim said, adding that the government should not have given permission to open so many banks. “The number of banks is more than the size of the country’s economy.”

BIBM Director General Toufic Ahmad Choudhury urged the central bank to make sure that there is a necessity to open up new banks before awarding them licences.

He also suggested voiding the licences of the new banks that will show bad performance.

-SAM

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