The government borrowing from the banking system would increase by 20% in the next fiscal year as compared to the current fiscal year to meet the widest deficit of the new budget.

The ceiling of bank borrowing has been set at Tk31,221 crore in the new budget which was set at Tk25,993 crore for the current fiscal year, according to a source in the finance ministry.

Though, the government increased the borrowing target to Tk29,982 crore in its revised budget due to fall in revenue collection.

Of the total amount of borrowing, Tk19,824 crore has been set for long term credit and Tk11,397 crore for short term credit, which was Tk16955 crore and Tk13,027 crore respectively in the revised budget of the current fiscal year.

The government needs to increase the amount of bank borrowing due to the demand for higher allocation by different ministries and divisions amid a slow revenue growth, a finance ministry official said yesterday.

The higher target of borrowing from the banking system is apprehended to affect the private sector and put pressure on inflation, said former adviser to a caretaker government Mirza Azizul Islam.

Entrepreneurs are now preparing to come up with large scale investment as private sector investment was nearly closed ahead of general election on January 5, said a senior executive of a private bank.

In these circumstances, higher ceiling of government borrowing might affect the liquidity position in the money market, he said.

The government borrowing in the current fiscal year did not affect the money market due to lower demand by private sector, he added.

The government wants to borrow Tk43,277 crore from domestic source in the new budget which is 27% higher from Tk33,964 crore that was set for the current fiscal year.

The borrowing target from foreign source has been set at Tk18,069 crore in the upcoming budget.

The target was set at Tk14,398 crore in the current fiscal year and cut down to Tk12,613 crore in the revised budget to be placed today.

News:Dhaka Tribune/05-Jun-2014

Dhaka Bank on Wednesday donated Tk 1.2 crore to Khulna University & Rotary District Community Hospital under its CSR initiatives at a programme in Dhaka.
Bangladesh Bank governor Atiur Rahman was present at the event as chief guest, said a news release.
Dhaka Bank chairman Abdul Hai Sarker, directors, and managing director Niaz Habib, and Bangladesh Bank deputy governors were also present.
KURDCH chairperson Ferdousi Ali received the cheque on behalf of her institution.

Bangladesh Bank will set simple rate of interest on farm loan instead of existing compound rate of interest in a bid to save the farmers from the burden of bank interests, said officials of the central bank. The BB will receive the relaxed rule in its upcoming agriculture and rural credit policy and programmes for financial year 2014-15. The credit policy is likely to be declared next month. Under the simple rate of interest, the farmers will pay their interest of the bank loans at the end of loan tenure meaning that they will get relief from a huge amount of interest. ‘The farmers are now counting interest on quarterly basis. From second quarter on, they have to pay the interest on the principal amount including the quarterly interest’, a BB official told New Age on Wednesday. The tenure of farm loan is maximum one year. The banks usually set compound rate of interest for almost all types of credit products, but they will have to set the simple rate of interest for the farm loan from July, he said. He said that the new policy would help the farmers to repay the bank loans as they would count lower rate of interest than the existing rate of interest. He said that the farmers would be able to protect themselves from the defaulting situation when the new policy will be introduced. The BB is likely to set farm loan disbursement target for local and foreign banks at around Tk 15,547 crore for the FY15 in its new farm loan policy. The probable loan disbursement target is 6.52 per cent higher than that of the current FY. The BB had set annual farm loan disbursement target at Tk 14,595 crore for the FY14, Tk 14,130 crore for the FY13 and Tk 13,800 crore for FY12. The banks disbursed Tk 14,667.49 crore, or 103.80 per cent of the annual target of Tk 14,130 crore farm loan in FY13. In the FY12, the banks disbursed Tk 13,136.91 crore, or 95 per cent, farm loan against the target of Tk 13,180 crore. Farm loan disbursement by the banks stood at Tk 13,109.53 crore in July-April of the FY14 against the annual target of Tk 14,595 crore. The banks collectively disbursed 89.82 per cent of their annual farm loan target in the first 10 months of FY14 whereas 83.09 per cent was disbursed during the same period of FY13.

The bank authorities took the decision yesterday

The government is likely to pump up Tk5,000 crore into the four state-owned banks in the new fiscal year to bridge their capital shortfalls.

The figure is almost 22% higher than the outgoing fiscal year’s Tk4,100 crore, which was allocated in the first phase as a bailout package against the banks capital deficits.

With an allocation for bridging the capital shortfalls of the state-owned banks, the government’s non-development capital expenditure may now stand at Tk26,600 crore in the new fiscal year, beginning from next month.

The figure is more than 37% higher than the revised allocation of Tk18,909 crore and 24% higher than the original outlay of Tk20,978 crore in the outgoing fiscal year.

“The government will allocate fund for the state-owned banks to convert their goodwill to capital,’’ Finance Minister AMA Muhith had earlier told the Dhaka Tribune.

Non-development capital expenditure means that the government will invest the amount in asset collection, land acquisition, construction and public works, share and equity in the new budget.

Of the total outlay of non-development capital expenditures, for revitalising the moribund capital market, the government might allocate Tk1,600 crore, a sharp increase of almost 78% over the outgoing fiscal year’s allocation of Tk9,00 crore.

The government had revised down the allocation to Tk300 crore from Tk900 crore during the outgoing fiscal as the fund was not utilised due to the tougher disbursement conditions imposed upon the small investors, who were badly affected in the share market debacle in late 2010. 

However, the country’s twine bourses demanded to allocate Tk5,000 crore for the upcoming fiscal to stabilise the market.

Referring to Bangladesh Fund of Tk5,000 crore that was formed after the share market debacle in late 2010, former advisor to the caretaker government Mirza Azizul Islam had earlier said, “As this fund is yet to be utilised, I don’t think any market stabilised fund is needed right at this moment.”

“Some South Asian countries have already formed such market stabilisation funds in 1996-98 but in most cases such kind of fund eventually had become losing concern,” he, however, added.