BB asks banks to give soft loans to Sidr-hit people

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FE Report
The Bangladesh Bank (BB) has advised the commercial banks to provide loans at low rate of interest to the affected people recuperating from their losses sustained by the cyclone Sidr.
The advice was given at a bankers' meeting held at the conference hall of the central bank Tuesday with the BB Governor Salehuddin Ahmed in the chair.
The central bank is ready to extend foreign currency support to the commercial banks for settling the import bills of essential commodities, particularly food grains, to help avert any shortfall in the near future.
The BB has taken the move at a time when the country's foreign exchange reserve stood at US$5.58 billion Tuesday, sufficient to meet the import bills for more than three months.
"We are ready to meet any demand for foreign currency support by the commercial banks against import of food grains. Joint efforts will be undertaken to boost local production," the BB governor told reporters in reply to a query.
He also said: "The country's economy faces a great challenge following devastations caused by two consecutive floods and cyclone Sidr. We need a coordinated effort to face this challenge."
Cyclone Sidr that struck the country on November 15 partially or totally damaged standing crops on around 0.5 million hectares of land in south and south-western coastal districts, causing a loss of around 0.6 million tonnes of food crops, particularly the Aman paddy, according to the initial assessment of the agriculture ministry.
The cyclone also damaged winter vegetables, oil seeds, pulses, transplanted Aman paddy of local and high yielding varieties and seedbeds of Boro paddy in vast areas.
Regarding the overall economic situation, the BB chief said the central bank is watching the situation closely and the Policy Analysis Unit (PAU) is now preparing a report on the overall performance of the economy.
"There is nothing to worry much about except for the agricultural sector. The industry and service sectors are running smoothly," the central bank governor said.
The gross domestic product (GDP) is likely to be affected slightly following the floods and cyclone, he said. But the central bank chief did not make any comment about the fears of a fall in GDP by the Manila-based Asian Development Bank (ADB).
"GDP growth is expected to be below 6.0 per cent in fiscal 2008 compared with 6.5 per cent in the year, because of extensive flooding and cyclone, and a slowdown in external demand for garments," the ADB said in its Bangladesh Quarterly Update (September 2007), released Monday.
"If it's not at the same level of previous year (6.5 percent), the growth will be reasonably maintained," he told a questioner.
The BB governor predicted that inflation could cross double digit figure due to disruption in supply chain in the cyclone-affected areas.
The central bank also requested the commercial banks to make less profit this year to help rebuild the disaster-hit economy by providing loans at low rate of interest.
"The banks may be able to double their profits in future if economic activities can be rejuvenated," the BB governor said, adding "sacrifice profits a bit only for this year and target long term profits for the interest of maintaining the country's economic growth".
During the meeting, the central bank advised the commercial banks to provide better and cheaper short term loans to the fishermen for revamping their activities in the cyclone-affected areas.
The BB also asked the banks to provide loans to timber traders at low rate of interest to facilitate their business in the country's southern districts.
"We have advised the banks, particularly private commercial banks (PCB), which have no branches in the remote areas, to link up with non-governmental organisations (NGOs) for ensuring financing facilities in the cyclone-hit areas," Ahmed added.
Sources, however, said the Micro-credit Regulatory Authority (MRA) has already sent the list of some NGOs to the PCBs to facilitate such financing in those areas.
The central bank also asked the banks to develop new banking products for financing housing sector with loans amounting to, between Tk 20,000 and Tk 50,000, for the cyclone-affected poor people.
"We have suggested the banks to invest not only in the agriculture sector but to finance activities in other areas including housing for Sidr- survivors," the central bank chief noted.
The central bank also asked the banks to realise export proceeds in line with the existing rules and regulations.
For delay in repatriation or non-realisation of export proceeds, responsible exporters and the authorised dealers or banks and their officials are subject to punitive action under the Foreign Exchange Regulation Act, 1947.
The BB asked the commercial banks to check the misuse of electricity to help maintain the normal supply of power across the country while the bankers assured him of taking necessary measures in this connection.
The finance ministry earlier advised the central bank to inform the commercial banks about saving electricity in all of their branches.
Currently, 48 scheduled banks are operating their business through 6,625 branches across the country.
The meeting discussed the overall trading activities of the government-approved securities in the secondary market and reviewed the latest situation of the country's inter-bank foreign exchange market.
"We have suggested the banks to disburse loans as early as possible to the identified sectors to facilitate the on-going post-flood and post cyclone rehabilitation programmes," the BB governor told reporters after the meeting.
The central bank suggested the banks having surplus liquidity to expedite their lending activities in areas of agriculture, small and medium enterprises (SME) and housing sectors.
Excess liquidity of the scheduled banks stood lower at Tk 131.29 billion at the end of August last against Tk 142.79 billion as of end June, 2007, according to the BB's statistics.
"Despite the huge liquidity, the monetary policy remained accommodative in practice instead of the earlier announced cautious policy," the central bank governor noted.
Ahmed called upon the senior bankers to visit the affected areas to supervise lending operations as the central bank has been informed that some bank officers were not active enough to perform their duties which is inconsistent with the emergency.