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Launches arrays of products

Ali Reza Iftekhar

Ali Reza Iftekhar

Eastern Bank Ltd (EBL) has recently launched some new ‘innovative products’ aiming to diversify its business and also to help develop the country’s economy through reducing the cost of borrowing in favour of entrepreneurs.

“The recent bunch of new and distinctive products like launching of Commercial Paper deal, EBL Projukti for farmers, EBL SkyMiles and tie-up with agoda.com will patently help the country’s trade and commerce to grow further,” Ali Reza Iftekhar, Managing Director and CEO of EBL told The Financial Express in an interview Monday.

Mr Ali Reza said the new products will also help raise the EBL’s power of effective articulation for value creation.

Commercial Paper

EBL acted as the Arranger and Agent for the recent issuance of Commercial Paper, a low-cost alternative to bank loans to the tune of BDT 500 million by ACI Limited where different corporate entities, financial institutions and asset management companies participated (Techno Ventures Ltd, Midland Bank Ltd, Smile Food Ltd, Vanguard Asset Management Ltd, Confidence Steel Ltd and NCC Bank Ltd.).

This is a 180 days interest bearing commercial paper, cent per cent backed by Bank Guarantee issued by EBL.

EBL arranged this Commercial Paper deal of ACI Ltd, first of its kind in Bangladesh.

The EBL CEO said: After the ACI, a large number of companies are now knocking us for getting the new service.

“This deal is a milestone for us for three reasons. Firstly, Commercial Paper is a money market instrument, the concept of which is prevalent globally but has been issued for the first time in Bangladesh. This has helped broaden the investment opportunities in the market by providing an additional financial instrument for the investors,” the EBL MD said.

He said secondly, corporate houses will be able to raise financing from the market without depending only on borrowings from financial institutions to meet part of short term fund requirement.

Finally, it highlights the drive of Eastern Bank Ltd towards its continuing contribution for the development of the financial market through providing unique and innovative solutions to its customers.

Commercial paper is a promissory note with a fixed maturity of 1 to 365 days. Commercial paper is a money-market security issued by large corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation’s promise to pay the face amount on the maturity date specified on the note.

Since it is not backed by collateral, only firms with excellent credit ratings from a recognized rating agency will be able to sell their commercial paper at a reasonable price.

Commercial paper is usually sold at a discount from face value, and carries higher interest repayment rates. Typically, the longer the maturity on a note, the higher the interest rate the issuing institution must pay. Interest rates fluctuate with market conditions, but are typically lower than banks’ rates.

Commercial paper is a low-cost alternative to bank loans. Issuers are able to efficiently raise large amounts of funds quickly. Competitive, market-determined yields in notes whose maturity and amounts can be tailored to specific needs, can be earned by investors in commercial paper.

Proceeds from commercial paper issues can be used to finance “current transactions,” which include the funding of operating expenses and the funding of current assets such as receivables and inventories. Proceeds cannot be used to finance fixed assets, such as plant and equipment, on a permanent basis.

Commercial paper is typically a discount security (like Treasury bills): the investor purchases notes at less than face value and receives the face value at maturity. The difference between the purchase price and the face value, called the discount, is the interest received on the investment. Commercial paper is, occasionally, issued as an interest-bearing note (by request of investors). The investor pays the face value and, at maturity, receives the face value and accrued interest. All commercial paper interest rates are quoted on a discount basis.

On the day the commercial paper is issued and sold, the investor receives and pays for the notes and the issuer receives the proceeds. On the day of maturity, the investor presents the notes and receives payment. Commercial banks, in their role as issuing, paying, and clearing agents, facilitate the settling of commercial paper by carrying out the exchanges between issuer, investor, and dealer required to transfer commercial paper for funds.

Globally, Commercial paper can be issued by a wide variety of domestic and foreign firms, including financial companies, banks, and industrial firms. Finance companies are the biggest issuers in the financial firm category. Finance companies provide consumers with home loans, unsecured personal loans and retail automobile loans. They provide businesses with a variety of short- and medium-term loans including secured loans to finance purchases of equipment for resale. Some finance companies are wholly owned subsidiaries of industrial firms that provide financing for purchases of the parent firm’s products.

EBL Projukti for farmers

EBL recently launched EBL Projukti for the farmers to buy agricultural machineries and equipment.

EBL Projukti is designed to extend credit facility to the farmers who intended to buy agricultural equipment and machineries. This facility is only for the end user.

An individual farmer can avail the quarterly installment-based term loan ranging from BDT 10,000 to BDT 1,50,000 for maximum two years to purchase agricultural machinery and irrigation equipment. Maximum 70 per cent of machinery price will be provided as loan. No collateral will be required.

As the largest private sector, agriculture (crops, livestock, fisheries and forestry) contributes about 20 per cent of the GDP, sustains the livelihood of about 52 per cent of the labour force, and remains a major supplier of raw materials for agro-based industries. Agriculture plays an important role in the overall economic development of Bangladesh.

EBL SkyMiles

To provide an exciting and exclusive reward experience to customers, EBL in partnership with international credit card company Visa, has introduced Bangladesh’s first AirMile Reward Program-EBL SkyMiles.

All Visa Platinum, Visa Signature and Visa Infinite credit cardholders of Eastern Bank Ltd. will be able to earn AirMiles against the use of their cards and redeem the same for free air tickets. EBL has also launched three SkyMiles branded Platinum, Signature and Infinite cards to further enhance the customer experience.

Under this unique program, cardholders will accumulate SkyMiles while spending through their EBL Credit Cards. For every BDT 60 or USD 1 spend through POS/Card Cheque, Cardholder will get 1 (One) EBL SkyMiles. The cardholder would be able to redeem the accumulated SkyMiles for free air tickets, for any destination across the world and on over 360 airlines.

A dedicated website www.eblskymiles.com has also been launched to provide more information and allow the customers to manage their SkyMiles.

Tie-up with agoda.com 

EBL as the first bank in Bangladesh has tied up with agoda.com making it easier for the customers to make their hotel bookings online. It is an Online Travel Agency (OTA) that specializes in hotel booking.

EBL Cardholders will get up to 7.0 per cent off over already lowest agoda.com rates. Agoda.com is a platform through which EBL cardholders can choose from over 2,85,000 hotels.

Talking about the motto of the bank, Iftekhar says in a confident note, ‘winning for today is building for tomorrow.’ He added, ‘We believe in a culture of A3, i.e. adaptability, attitude and appreciation.’


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