BB asks banks to disburse larger loans in phases

Published : Friday, 24 March, 2023 at 12:00 AM Count : 264

Business Correspondent

Bangladesh Bank has suggested banks should disburse any large loan in phases rather than in a lump sum way in order to ensure proper utilisation of the loans and check money laundering.

The central bank made the suggestion in its quarterly report on 'Money and Money Exchange Rate'. The report was released on Wednesday.

The BB in its report said that banks must make proper assessments before providing loans and ensure that the loans were utilised properly with a view to reducing the banks' total classified loans.

The amount of defaulted loans in banks soared to Tk 1,20,656 crore at the end of December 2022 from Tk 1,03,273 crore in the same period of 2021, according to BB data released on Sunday.

Non-performing loans (NPL) amounted to Tk 88,734 crore in December 2020. Despite promises from the government and the central bank to reduce defaulted loans, the situation is deteriorating, bankers said.

Of the total defaulted loans, Tk 1,06,982 crore or 88 per cent turned into bad loans which the central bank apprehended were not recoverable.

The total loans disbursed were Tk 14,77,788 crore at the end of December 2022 and 8.16 per cent of them became classified. The ratio was 7.93 per cent at the end of December in 2021.

The rising volume of NPL's is expected to have myriad adverse consequences, including destroying the trust of depositors, which is resulting in reduced deposit growth in the banking sector.

The BB in its report claimed that it had strengthened monitoring on loans and loan recovery of the banks to avert risks of defaulting.

It also said BB had been working to reduce defaulted loans, address risks in money and loan market, protect interests of depositors, prevent imbalance in between asset and liability in the banking sector and promote growth in the private sector credit for the continuation of economic development.

The central bank has imposed various restrictions on imports of luxury products, which helped to check foreign currency crisis on the market. The real effective exchange rate was Tk 104.81 at the end of December 2022.

The country's trade deficit dropped to $12.3 billion in July-December period of FY23 compared with that of $15.7 billion in the same period in the past financial year 2021-22 due to a fall in imports.

According to the Bangladesh Bank (BB) data, the private sector credit growth dropped to 12.8 per cent in December, the sixth month of the current financial year 2022-23, from 13.97 per cent in November.

Inflation has increased in recent days due to a host of reasons, including rising import cost and energy prices on the local market and appreciation of the dollar against the local currency taka.

Due to the high global inflation, it appeared to be challenging for Bangladesh to lower the inflation to a bearable mark, the report said. Inflation has become the most challenging task for the financial sector.

To avert pressure on the exchange rate, the county needs to reduce imports and raise domestic production, it suggested, adding that exports and remittance inflow must be raised.