BB asks banks to boost credit flow to thrust sectors

FE Team | Published: June 13, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

FE Report
The Bangladesh Bank (BB) has asked the commercial banks to boost up credit flow, particularly to thrust sectors, for achieving seven per cent growth of gross domestic product (GDP) in fiscal 2007-08.
The directive came at a bankers' meeting held at the conference hall of the central bank Tuesday with the BB Governor Salehuddin Ahmed in the chair.
Finance ministry forecasts a 7.0 per cent GDP growth for the fiscal 2007-08 in the proposed budget.
The central bank instruction relating to increase in the credit flow to the private sector came against the backdrop of its declining trend during the first nine months of the current fiscal.
"We have asked the bankers for taking measures to increase the credit flow to the thrust sectors like readymade garment (RMG) to facilitate the overall economic activities," the BB governor told reporters after the meeting.
The private sector credit growth rate fell to 11.02 per cent in the July-March period of the fiscal 2006-07 from 12.57 per cent in the same period of the previous fiscal.
The overall bank credit to the private sector stood at Tk 144.32 billion in the period against Tk 139.19 billion in the corresponding period of the pervious fiscal, according to the central bank statistics.
"The growth of private sector credit has been maintaining at 16 per cent and it will not fall below the level despite the government's borrowing from the banking system," the central bank chief said.
A total of Tk 72.53 billion has been set for borrowing from the country's banking system in the proposed budget for fiscal 2007-08.
He also said the credit flow to the private sector maintained a usual pace until December last, but the situation witnessed a slowdown due mainly to political uncertainty.
During the meeting, the BB governor asked a particular Shariah-based Islami bank for taking necessary measures to disburse credit for using their excess liquidity.
According to the central bank statistics, excess liquidity of the all scheduled banks stood higher at Tk 105.19 billion at the end of March last against Tk 95.91 billion in June 2006.
The central bank also asked the banks, particularly private commercial banks (PCBs), to move ahead with disbursement of the agriculture credit, mainly seasonal crop loans, along with the state-owned banks and financial institutions to help farmers.
"The PCBs agreed to extend their credit supports to the agricultural sector in the rural areas," the BB noted.
Sources, however, said most of the PCBs demanded incentive for disbursement of the agro-credit while they want expansion of their branch network.
Currently, at least three PCBs - National Bank Limited, National Commerce and Credit (NCC) Bank Limited and Islami Bank Bangladesh Limited - are disbursing farm credit.
Besides, the central bank asked the bankers to expedite the process of opening of letters of credit (LCs) against imports to ensure steady supply of the essential items in the local markets.
Some bankers drew the attention of the BB chief that different agencies have been asking information about financial transactions of their clients in various places across the country.
They also said the banks are ready to provide information but the process of taking information must be in line with the existing rules and regulations.
The BB governor assured the bankers to discuss the matter with the authorities concerned.
The central bank earlier asked the banks and non-banking financial institutions (NBFIs) to cooperate the law enforcing agencies through providing information about suspect individuals' transactions.
The BB also instructed to carry out the order instantly by the first class magistrate or metropolitan magistrate for freezing or confiscation of such accounts.
Regarding appointment of the private agency to recover default loans, the bankers expressed mixed reaction saying that such agencies are not interested to take responsibility of recovery bad loans.
The bankers also proposed the BB for taking measures to form asset management companies to reduce the pressures on default loans through selling out the bad loans, the sources added.
"The central bank assured them to look into the matter," a senior banker told the FE, adding that Pakistan has already formed such company to reduce the burden of non-performing loans.
The central bank also directed the banks to check forgery of bank instrument like pay order and draft through improving internal compliance mechanism.