Amid impending risks, foreign borrowing by the country's private sector keeps rising, which in turn increases the external debt gradually.
Bankers, beneficiaries and financial market analysts said the fund users might face difficulties in repaying the loans if the cost of borrowing continues to rise.
The appreciation of US dollars against Bangladesh currency also enhances the vulnerability manifold because the loan recipients have to repay the debt in dollars, they said.
Sources said foreign fund was available at a cost below 4.0 per cent, including LIBOR (London Inter-bank Offered Rate) just a few years ago but the cost has gradually gone up and now it has crossed 6.0 per cent in many cases.
The market analysts suggested strict monitoring by the six-member scrutiny committee under the leadership of Bangladesh Bank (BB) governor to oversee the cash flow of both borrowing companies and lenders for a longer period before approving loans.
The BB statistics showed the committee approved 134 proposals worth US$ 1,489.66 million in 2017, up from US$1,486.85 million the year before.
But in the first five months of the calendar year, the amount approved fund for the private sector is US$1,386.12 million, almost equivalent to the previous year's overall size.
The average loan per recipient increased to US$ 11.11 million in 2017 from US$ 9.0 million as recorded in 2016.
In the first five months of the year, it reached US$ 18 million.
In the past, the readymade garment industry dominated the chart of foreign borrowing.
But the trend started changing in recent years, with the power and energy sector making up over 60 per cent of the loans.
In terms of the actual flow of overseas debt, the private sector received over US$ 683 million during the financial year (FY) 2017-2018, up by 30 per cent from the previous fiscal when the amount was US$ 520 million.
The borrowing was, however, calculated without overseas funds coming through the offshore banking unit (OBU). If it is calculated, the figure will be much higher.
The major global lenders are the International Finance Corporation (IFC) of the World Bank, London-based Standard Chartered Bank, Hong Kong and Shanghai Banking Corporation (HSBC), the Asian Development Bank (ADB), Cixing (Hong Kong) Limited and Stoll Financial Services GmbH of Germany.
When contacted, Dr. Md. Azim Uddin, a joint director representing Bangladesh Investment Development Authority (BIDA) in the screening committee, said the number of private entrepreneurs seeking approval for external borrowing has grown in recent times.
He said various factors like debt-equity ratio (70:30), paid-up capital of the company and the utilisation status of previous loans if taken into consideration while approving foreign loans, the cost of foreign borrowing becomes lower than that drawn from domestic sources.
"Normally, we crosscheck every document the companies submit to the committee to avoid possible fraud. We prioritise export-oriented industry, import substitute sector and the power sector," he said.
Seeking anonymity, a senior BB official said the number of foreign loan recipients keeps increasing in recent times, making it difficult for the central bank to maintain external debt management with limited resources.
"Even some banks are borrowing money from overseas lenders and do business here taking the opportunity of lower cost of capital," he said.
Talking about the risk, he said the cost of borrowing from external sources continues to grow and in many cases it crosses the 6.0 per cent mark.
In contrast, the lowest rate of interest in the local banking system hovers at 9.0 per cent.
"The private sector in most cases borrowed long-term finance. If the LIBOR and other expenses keep increasing in the next couple of years, it could cause serious problem for the local entrepreneurs to repay the debt," he said.
Shafiul Islam Mohiuddin, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), agreed the trend in getting foreign funds by the private sector is growing in recent times.
He said the private sector is now building big infrastructural projects in the power and energy sector, which requires large volume of finance.
Local banks cannot provide funds even after forming syndication.
"So, there is no option other than depending on international lenders," he added.
Summit Group was one of the companies that recently got approval for borrowing US$ 355 million from the IFC.
When contacted, additional managing director of the group Faisal Khan said the absence of enough and quality liquidity in domestic sources prompted the company to look for external debt.
He said the cost of external loan is increasing but the cost-gap between local and overseas fund is still big.
Anis A Khan, former chairman of the Association of Bankers, Bangladesh (ABB), said the statistics on the external debts indicated the demand for such finances has increased in recent times.
The cost of fund from overseas sources is much lower than that of the domestic source, which encouraged the private sector to use it considering the business viability, he said.
"There is no liquidity shortfall. Still, we take it (foreign borrowing) positively. It will have no negative impact on local banks," said Mr. Khan, also managing director and CEO of Mutual Trust Bank Ltd (MTB).
Talking about the issue, research director of the Centre for Policy Dialogue (CPD) Dr Khondaker Golam Moazzem said the share of non-RMG (readymade garment) loans seemed to be increasing rapidly in recent times.
"Power and energy sector accounts for one-fifth of the overall loan amounts coming from overseas lenders. Projects in the sector need large volume of finance that might be difficult for the local banks to meet," he said.
Dr Moazzem said large, compliant business groups used to take out foreign loans lured by its lower interest rate.
He said two things -- growing cost of external debt and the appreciation of the greenback -- are minimising the cost-gap between internal and external sources, which needs to be taken care of.
He suggested that the long-term cash flow of the companies be monitored by the committee responsible for approving foreign borrowing proposals before allowing the firms to get overseas credit.
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