Banks wary amid soured loan fears

Siddique Islam | Published: July 08, 2020 23:49:45

Most of the banks are moving carefully while implementing the government's stimulus package for industrial and services sectors to avoid being trapped into fresh defaulted loans.
The lenders are scrutinising the track record of the interested borrowers as well as their repayment capacity, according to bankers.
Besides, key documents, including balance sheets, are sought to assess the working capital requirement of the customers, they said.
They said that most of the entrepreneurs are showing interest in availing cheaper loans under the packages intended to offset the economic shocks caused by the Covid-19 pandemic.
Of the 9.0 per cent interest rate, the government will provide 4.50 per cent as subsidy on loans to be sanctioned as the working capital, according to the guideline.
The banks are now trying to fast-track execution of such packages to help businessmen revamp their business activities immediately in line with the central bank's directive, the bankers said.
"We're giving top priority to implement the financial stimulus packages, particularly for large industries to help our customers resume their business operations," Abdul Halim Chowdhury, Managing Director and Chief Executive Officer of Pubali Bank Limited, told the FE.
Pubali has already disbursed almost one-third of Tk 5.02 billion it allocated for execution of economic relief package.
Mr. Chowdhury is hopeful about disbursing the remaining portion of the fund by the end of this month.
On July 02, the Bangladesh Bank asked all banks to take effective measurers for implementing the stimulus within the next month.
The banks have also been asked to implement the lion's share of the stimulus packages within this month and the remaining portion by August.
The expected recovery from the ongoing economic slowdown, caused by the coronavirus pandemic, will not be possible if the stimulus packages are not implemented in time, the BB said in its notice.
The City Bank Limited is also working on completing the disbursement of its approved fund under the package by the end of next month, its top executive said.
"We've already disbursed one-third of our approved fund under the stimulus package to our clients," Mashrur Arefin, MD and CEO of the bank, told the FE.
The country's first private bank has already applied to the central bank, seeking approval for a Tk 10.23 billion credit facility under the package.
Like Pubali and City, Mercantile Bank Limited has disbursed around Tk 4.0 billion out of its approved Tk 7.74 billion to their customers.
"We need some reliable documents of the interested customers to assess their working capital requirements, fixed at 30 per cent of total credit limit," Quamrul Islam Chowdhury, MD and CEO of the bank, told the FE.
The senior banker welcomed the relaxation of guidelines related to the loan disbursement by the central bank, saying it will help both the banks as well as the businessmen.
Earlier on June 25, the BB relaxed guidelines, allowing the banks and non-bank financial institutions to provide loans under the package to large industries and services in phases over the next three years instead of single disbursement.
The central bank has so far approved loan proposals, amounting to Tk 50 billion, submitted by more than 20 banks under the stimulus package of Tk. 300 billion for the large borrowers in industrial and services sectors hit by the pandemic The amount was set to be disbursed among around 500 firms.
"We're giving top priority to the approval of such loans to facilitate businessmen to offset the adverse impact of the Covid-19 pandemic on their businesses," a BB senior official told the FE on Wednesday.
Prime Minister Sheikh Hasina has so far announced a total of 19 stimulus packages amounting to Tk 1.03 trillion to offset the impact of the coronavirus pandemic on various sectors of the country.
The packages, which are equivalent to 3.7 per cent of gross domestic product, will be implemented under supervision of the central bank and the Ministry of Finance.