Bangladesh Samabaya Bank Ltd (BSBL) is gradually shifting its focus from rural employment generation to gold mortgage business for better profitability, data showed.
Available data show that the bank's investment in gold mortgage business surged to Tk 478 million in the fiscal year (FY) 2012-13 compared to Tk 359 million in FY 2010-11. The bank has set a target of Tk 950 million for the current FY to be invested in the same sector.
On the other hand, the data also showed that the BSBL had disbursed only around Tk 32 million in FY 2012-13, Tk 28 million in FY 2011-12 and Tk 17 million in FY 2010-11 among the farmers. The bank for the ongoing FY has set a target of agricultural loan disbursement at Tk 100 million.
However, officials at BSBL and the Department of Co-operatives (DoC) said the bank is running the business beyond the spirit of its formation.
But top officials of BSBL said that they have been running the gold mortgage business for their survival.
According to them, agricultural loan exemption by the then government in 1991 put a damper on their business and the bank had to incur nearly Tk 1.0 billion losses which forced them to focus on some higher, quicker and sure profit earning sectors like gold mortgage.
"The then government in 1991 first declared exemption of agricultural loan up to Tk 5,000 but later on excluded BSBL and BRDB from the coverage of the declaration which the farmers did not accept and BSBL had to count a total of nearly Tk 1.0 billion of losses, " Chief Executive Officer of BSBL, Dhirendra Chandra Das told the FE Wednesday.
He also said though the bank could not make over the losses it had to continue repaying the central bank's instalment which gradually made BSBL sick and after a certain period they even had to struggle for paying salaries and allowances to their staff members.
"But after doing the higher profit generating business, the bank has now become almost self- sufficient and is also strengthening activities in the agro financing simultaneously," he added.
However, a high official at the DoC preferring anonymity said BSBL should now switch over to its main business rather than concentrating on only profit earning as it is now almost self- sufficient and the government is paying Tk 989.6 million as subsidy.
The government in 2012 decided to provide Tk 989.6 million to BSBL as subsidy in instalment by 2017 understanding the reality of its losses after exemption of agricultural loans in 1991.
BSBL gives up to Tk 22,000 to a person against each bhori of gold at an interest of 18 per cent including 1 per cent insurance coverage charges whereas the bank charges around 10 per cent of interest against loans disbursed to agro based sectors.
However, the then Pakistan government on March, 31, 1948 formed the 'Provincial Co-operative Bank' with a view to generating rural employment through strengthening agricultural loans disbursement to the co-operative based farmers across the country.
After independence, Bangladesh government also carried out the bank's activities in agricultural financing with the same vision.
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