The nation's short-term foreign borrowing is less effective for industrialisation than that of long-term financing, according to a new study.
The study has also said that overseas bank borrowing is being misused in some cases.
The Bangladesh Institute of Bank Management (BIBM) has conducted the study.
The study said that although the country's private borrowing from overseas sources shot up to 24 per cent in September last year compared to the public sector borrowing, short-term loan is not supporting much for the industrialisation.
Out of the total private sector borrowing from foreign sources, a compound annual growth rate of 35.15 per cent is short-term borrowing while only 6.23 per cent was the long-term financing, the BIBM showed in its research findings, released Thursday at a seminar in Dhaka.
Director of the BIBM Prashanta Kumar Banerjee and his team conducted the research on "Private Commercial Borrowing from Foreign Sources in Bangladesh: An Anatomy".
According to the Bangladesh Bank, the country's public and private sectors' total external commercial borrowing was US$46.705 billion in 2017.
Of external borrowing in 2017, the private sector took out $8.45 billion or 35.15 per cent as the short-term loan, while $2.89 billion or 6.23 per cent as the long-term borrowing.
Prashanta Kumar presented the research findings where Abu Hena Mohd. Razee Hassan, Chairman of BIBM Executive Committee and Deputy Governor of the Bangladesh Bank, was present as the chief guest.
S. A. Chowdhury, Former Managing Director of Sonali Bank Limited and BIBM Professor, Md. Mahbub-ul-Alam, Managing Director and CEO of the Islami Bank Bangladesh Limited, and Shaikh Shamsuddin Ahmed, Professor, Department of Finance, University of Dhaka also spoke, among others, at the seminar.
The research findings showed that the commercial borrowing from the external sector is becoming expensive due to growing rate of the LIBOR (London Inter-Bank Offered Rate) on the international market.
Bankers suggested the local commercial banks go with EURIBOR whose rate is now negative. The LIBOR rate is increasing, which has now stood at nearly 2.7 per cent.
BB Deputy Governor Razee Hasan said the central bank had opened up the foreign borrowing following the pressure from the businessmen, especially from the exporters.
"Just after opening it, the borrowing was getting misused. But now it has been prevented. Bangladesh Bank is monitoring it strictly," he added.
Since many foreign companies have fallen into trouble with the foreign commercial loans, the central bank is cautious about this, he added.
BIBM Director General Dr Towfic Ahmad Choudhury said the government should introduce bond market to overcome the liquidity crisis in the banking sector.
The country's public and private sectors' total external commercial borrowing was US$46.705 billion in 2017.
Among the private sector external borrowing in 2017, it has taken $8.45 billion or 35.15 per cent as the short-term loan.
$2.89 billion or 6.23 per cent as the long-term borrowing.
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