Banks to lend higher working capital

The central bank of Bangladesh asks all scheduled banks to raise limits to working capital to help ramp up economic growth momentum, now that life and business are getting back in full gear.
With the direction for the banks to lend higher amounts of working capital to enterprises the Banking Regulation and Policy Department of the Bangladesh Bank issued Wednesday a circular signed by its general manager Ms Maksuda Begum.
The BB notes that business is on the wane due to the rise in prices of industrial raw materials and upturn in freights. "Production is being hampered due to the surges both in raw materials and freights and needs to be funded further," it says.
Apparel industry's raw materials include cotton, wool, man-made fibre, buttons, plastics and even papers. The war in Ukraine has further worsened the state of affairs.
Against this backdrop, businesses have been facing difficulties to pay the cost of imported goods by using the existing limit to working capital set by the banks.
The repayment tenure of working capital is a maximum of one year and lenders set the ceiling of the loan given the cash flow of businesses.
The BB in the circular mentioned that many importers were now being unable to settle their imports despite being provided maximum amount of working capital by the banks. As such, the limit may increase through the bank-client relationship by analyzing the risk associated with the investment.
"Banks can raise the limit rationally, depending on the clients' financial strengths," the circular reads.

jasimharoon@yahoo.com