State-run banks must give loans to BPC if they use bonds

Shakhawat Hossain brThe finance ministry Tuesday said state-run banks must provide loans to Bangladesh Petroleum Corporation (BPC) if they use BPC bonds to maintain the central bank statutory liquidity ratio (SLR), officials said.brThe banks -- Sonali Bank Limited and Janata Bank Limited -- were given bonds worth over Tk 70 billion in the last fiscal against the BPCs outstanding dues to them.brThe bonds were issued after the banks refused to finance BPC's fuel oil import as large volumes of unpaid loans tend to weaken the financial position of the banks. brAs Sonali and Janata have been urging to be allowed to use BPC bonds to maintain the SLR, the finance ministry decided to ask the authority to impose the condition in a meeting last week, said the officials.brSuch condition will enable the BPC to continue importing fuel oil with funding support from the reluctant state-owned commercial banks, they said. brOn an average Bangladesh needs to import 85,000 barrels of refined and crude oil a day.brIn the 2007-8 fiscal, the BPC spent around $3.1 billion to import 3.7 million tonnes of oil. The amount was at least $1.0 billion higher than the previous year.brAs per the existing Bangladesh Bank rule, the commercial banks must keep aside 18 per cent of its total savings in the form of cash, gold and approved securities to maintain the SLR.brAn official of the finance ministry said the central bank has already approved the use of BPC bonds in maintaining SLR by Sonali and Janata.brBesides the SLR issue, the finance ministry meeting also took a number of decisions on BPC in the wake of sharp fall in oil price in the international market.brThe decisions include mandatory monthly update of the BPC's trade gap and payment of outstanding dues to the Petrobangla in phases.brThe finance ministry expects a major decrease in BPC's losses and subsidies against local sale of petroleum products following decline in international prices of fuel oil by almost 25 per cent since July this year.brFinance ministry officials said the monthly assessment of BPC losses have become essential for proper utilisation of the budgetary allocation worth Tk 60 billion earmarked for subsidising oil import in the current fiscal.brThe ministry made the budgetary allocation based on the price of crude oil at $120 per barrel.br