Bank loans gain momentum
The economy of the country shows the sign of revival as Covid-19 situation improves. Many entrepreneurs are taking up new projects and some entrepreneurs are increasing production. There has been a noticeable upward trend in production the readymade garment and steel sectors in addition to setting up new projects. New solar and fuel-based power plants and liquefied natural gas (LNG) companies are opening. As a result, import of capital machinery and raw materials are increasing, so does import cost.
The flow of loan is on the rise in the private sector as businesses take up new initiatives and expand their operations. Stalled by the coronavirus pandemic, loan disbursement has now bounced back, injecting momentum into the banking sector.
Banks, however, face a little pressure due to increase in import and import costs. As the cost of imports is paid in US dollars, a bank is to go to another bank and the central bank. Also, rising dollar prices have increased import costs. Though banking and the private sectors are bouncing back, there are concerns these sectors may face pressure, experts observed.
Speaking to Prothom Alo, Agrani Bank managing director Mohammad Shams-ul-Islam said the economy is recovering from the stalemate caused by coronavirus pandemic. Frozen food, apparel and yarn are being exported. New projects are being initiated. Green factories are receiving work orders at higher prices, he added.
Mohammad Shams-ul-Islam further said Agrani Bank sees a loan recovery rate at 96 per cent in small medium enterprise (SME) sector and 90 per cent in other sectors. Overall, the economy of the country has taken a U-turn. But price of everything including raw materials and capital machinery has gone up, raising the costs.
Records of the loan disbursed in the last five years show the loan balance rises, on average, Tk 100 billion (10,000 crore) a month. But it dropped to Tk 50 billion (5,000 crore). However, loan balance has increased this year with May-June seeing a rise by Tk 170 billion (17,000 crore) and August-September by Tk 160 billion (16,000 crore).
Meanwhile, loan disbursement rose 9.44 per cent in October and 8.77 per cent in September year-on-year. With this figure, it couldn’t be determined how much loan had been disbursed. New loans are being released after recovering old ones plus new interest is being included too. It seemed the impact of coronavirus has gone away. As a result entrepreneurs have started finding their feet. Profit of banks listed in the share market shows such signs. Profit of companies in garment, textile, steel, consumer goods, food, technology and service sectors is on the rise.
Besides, clients also started increasing in banking sector along with rise in commercial loans. Housing, car and personal loans have increased now. Banks have sent employees to the field in order to increase consumer loans but they have been more cautious in loan disbursement. Most of the banks are giving loans to the employees of established banks only.
Overall loan disbursement has gone up. As of this October, loan balance increased to Tk 1,219 billion (1,219,536 crore). It was Tk 1,211 billion (1,210,722 crore) in September and Tk 1,194 billion (1,194,391 crore) in August.
Speaking to Prothom Alo, managing director of Prime Bank Hasan O Rashid said, “Our bank sees 8-9 per cent growth in loan. Entrepreneurs are taking current capital to operate business. Also, new projects are being taking up too. Entrepreneurs are increasing production capacity in the yarn and steel sector. New power plants are also being constructed. Taking everything into account, we hope to see a better growth next year.”
He said banks are not managing to serve customers despite the demand. Because, many people lost jobs during coronavirus, salary becomes irregular at many companies. Consumer loans would also see better growth next year because privileges that private sector employees enjoy will become regular after the economy bounces back, he added.
Meanwhile, many banks have focused on fund collection due to rise in demand of loan. Banks now provide loan at maximum 9 per cent interest. Beside, average inflation is more than minimum interest on personal term deposit. As a result, the net income of banks depends on their capacity.
This report appeared in the print and online edition of Prothom Alo and has been rewritten in English by Hasanul Banna