Central bank wants to reduce dominance of corporate loans

Bangladesh Bank Governor Md. Mostaqur Rahman has said that credit growth in the private sector is still negative. He said bank loans are concentrated in certain sectors and among large borrowers. Yet small entrepreneurs are not getting loans despite demand in rural areas. He said the job of a bank is not just to give corporate loans; lending at the small and individual level is also part of banking operations.

The governor said this while speaking as the chief guest at the first session of the Fifth Bangladesh Economic Conference, organized by the daily Bonik Barta at the Sonargaon Hotel in the capital today, Saturday. The topic of the session was "Roadmap of the Economy amid Global Uncertainty: Strategies for Macroeconomic Stability, Investment, and Energy Security."

The governor said, "The rate of corporate loans in the country is 70 to 80 percent. It is important to reduce this rate. There is a plan to give 20 percent of total loans as small loans from next year. The central bank is working to gradually raise this rate to 40 percent. This will increase production and reduce the country's economic problems."

Noting that banks are responsible if large borrowers default, Md. Mostaqur Rahman said, "Banks have given loans after verifying documents. So banks cannot avoid responsibility for loans not being recovered. If a factory is shut down, we must think about how it can be used. If necessary, arrangements should be made to remove the factory's machinery and set up work like quilt stitching there, so that economic activity does not stop completely."

In his words, "There is demand for loans in villages. Microcredit institutions give loans at interest rates of up to 24 percent. Yet banks have not paid attention to this sector."

He requested bankers to take the matter into consideration. The governor believes that farmers and small borrowers repay loans on time. As a result, lending in this sector can reduce the default rate.

Addressing bankers, the governor said, "Whatever price the dollar is bought at, banks profit from it. Because an additional charge is added to the purchase price. This affects traders and consumers. I am demanding that this be reduced. Because if attention is paid to the country's businesses and consumers, the economy will become dynamic."

He raised the matter of seeking Tk 60,000 crore from the budget every year for the next eight years for bank restructuring. The governor said, "This money is needed for practical reasons. Inflation has decreased somewhat, by about 50 basis points. However, this rate is still high. Work is underway to reduce inflation. It has come from the foreign exchange rate. Over the past few years, the exchange rate has increased by 60 percent. A decision will be taken by analyzing data and information on this matter."

On energy security, he said, "Work is underway so that the reserves do not come under extra pressure due to fuel imports. Importance has been given to solar power. Various steps will be taken in the future to increase energy security. However, it will take time to get the benefits of these initiatives."

Responding to a question, Md. Mostaqur Rahman commented that banks are being urged to disburse all types of loans quickly. He said, "Extra emphasis has been placed on loans in the small and medium enterprise (SME) sector to increase people's purchasing power. Opportunities have been given for all levels of students to send money legally to meet the costs of studying abroad."

At the event, Meghna Group Chairman and Managing Director (MD) Mostafa Kamal emphasized increasing investment in renewable energy to tackle the energy crisis. He said, "There is an allocation of Tk 500 crore in the Energy Efficient Fund to increase investment in energy-saving technology. If this allocation is increased, investment will also increase. At the same time, if the cost of loans for solar power projects can be reduced, people's interest in this sector will increase."

Meanwhile, Association of Bankers, Bangladesh (ABB) President and City Bank MD Masrur Arefin said people's trust in the banking sector is returning.
He said, "The loan interest rate is currently a problem. Lending operations are also proceeding slowly. However, since other fund operations are continuing, there is no need to rush on this matter. The issue of problem loans has been going on for a long time. Although defaulted loans are embarrassing, we must come out of this situation. Then the condition of banks' balance sheets will improve."

Masrur Arefin said there is currently Tk 4 lakh crore in liquidity in the banking sector. Efforts will be made to invest this money properly.

At the session, Southeast Bank Chairman M Abul Kashem emphasized keeping the banking sector free from political influence.

One Bank Chairman S M Shahidullah Khan raised the question of whether the central bank's policies are being properly implemented at the lower levels. He also mentioned that long waits at the airport cause suffering for businesspeople.

In addition, Prime Bank Chairman Tanzil Chowdhury highlighted the need for the central bank to take initiatives to address the dual challenges of the banking sector. Agrani Bank Chairman Syed Abu Naser Bakhtiar Ahmed highlighted various complications regarding loan exit policies, loan restructuring, and showing interest in the income sector.

Walton Hi-Tech MD Waliur Rahman Khalid emphasized increasing facilities to boost exports. He announced special initiatives to tackle the energy crisis and sought the governor's intervention for easy loan disbursement in this sector.