Latest MPS to help raise private sector investment: MCCI

FE Report | Published: January 30, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

The Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) Wednesday appreciated the latest monetary policy statement (MPS) announced by Bangladesh Bank aiming to keep inflation in check and stimulate private investment that suffered a setback in late last year due to prolonged political unrest.
It, however, mentioned that a 20-21 per cent growth in the credit to private sector would be required when the political situation would improve further compared to the modest 16.5 growth as set in the new MPS.
The MCCI issued a press release on the latest MPS unveiled January 27 last.
The chamber is concerned about the growing menace of loans scams in the banking sector, poor recovery of bank loans that has led to a large increase in the volume of classified loans, and the falling capital-asset ratio of banks in general, according to the press release.
"To be frank, the recent Tk.40 billion recapitalisation of state-owned banks by government with tax payers' money cannot be considered very prudent as it may cause moral hazard and encourage banks to indulge in more malpractices, for example, recklessly granting bad loans, weakening of loan recovery efforts, and so on," MCCI noted.
The MCCI said the latest monetary policy announced by BB has enough space for significant rise in private sector investment over the next few months of the present fiscal.
The chamber body said: "It is good to see that during the second half of FY14, BB will continue the policy measures it has already taken to cushion the impact of recent disruptions in domestic business."
To prop up investment, the MPS keeps the private sector credit growth target unchanged at 16.5 per cent.
It notes that during July-November of current fiscal, private sector credit grew by only 11.1 per cent, much behind the target of 16.5 per cent, reflecting the sluggish investment due to uncertain business environment created by the political unrest in the run-up to the January 5 national elections.
Now, with improvements in the political situation in sight, the new MPS foresees a strong growth in private investment, and with that, a substantial rise in the demand for private sector credit, the MCCI notes.
It also said measures include disbursement of the Export Development Fund (EDF) to export-oriented sectors at lower interest rate, instructing banks to offer loan rescheduling facilities to genuine borrowers on easy terms, and some facilities to small and medium enterprises (SMEs) that have been temporarily affected by the recent strikes and disruptions.
"We also hail the inclusion of some new sectors like leather and ceramics in the EDF and the BB's plan to include more such emerging sectors in future," MCCI added.
The MCCI appreciates that the new MPS encourages big industrial conglomerates to raise fund from the stock market, instead of borrowing from banks, to meet their investment needs. This move will on the one hand help banks comply with the recently revised regulation on single borrowers exposure limits for business groups, and make more funds available for small private sector borrowers on the other.
The Chamber also appreciates that the MPS limits the government's bank borrowing target to the same level as in the previous MPS (Tk.260 billion).
"Sticking to the previous borrowing target in money terms rules out any fear of crowding-out of private sector credit," it observed.
The BB also deserves appreciation for launching a new Tk.2 billion refinancing facility to stimulate entrepreneurships among low income rural households, it noted.
It appreciates the BB's measures to maintain external sector stability and its determination to support a market based exchange rate while seeking to avoid excessive exchange rate volatility. "We would, however, like to see an exchange rate favorable to exports and remittances," the MCCI press release added.