Demand for industrial loans drops amid political turmoil

Posted by BankInfo on Sun, Nov 24 2013 11:29 am

The disbursement of industrial term-loans continues to slide on the back of growing political unrest.
Between July and September, banks and non-bank financial institutions disbursed over Tk 8,880 crore of term loans, down 8.63 percent year-on-year and 15.53 percent from the previous quarter, according to data from Bangladesh Bank.
The disbursement of industrial term loans were Tk 10,061 crore and Tk 10,513 crore in the first and second quarters of the year respectively.
Industrial term loan includes disbursement of fresh credit, rescheduling of term loans and fund release for balancing, modernisation, rehabilitation and expansion of industrial units.
Bankers said uncertainty in the run-up to elections has acted as the biggest reason for the slowdown in industrial activities, but the tight BB policies and extra cautiousness by banks in the wake of rising fraudulence, has not helped matters either.
But Helal Ahmed Chowdhury, managing director of Pubali Bank, pointed out the recent trend of taking out low-cost loans from foreign sources and adjusting their term loans domestically, as the reason for the banks’ falling disbursement of industrial term loans.
The rising non-performing loans, of nearly 13 percent, have also squeezed many banks’ hands, he added.
“Borrowers and bankers, both are cautious as it is an election year,” said Nurul Amin, managing director of NCC Bank.
The accompanying political turmoil, together with the existing constraints of poor infrastructure and scarcity gas and electricity, has made business conditions “very tough”, he added.
The development, however, does not bode well for the country’s economy, as the industrial sector has been vital in sustaining the steady economic growth over the past one decade.
The sector’s contribution to gross domestic product (GDP) stood at 32 percent in fiscal 2012-13, in contrast to 26 percent in fiscal 2000-01 and 21 percent in fiscal 1990-91.

News:The Daily Star/22-Nov-2013

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