Bangladesh: Loan release for industry expansion posts negative growth in FY14

Dhaka, August 15, 2014 (New Age): Term loan disbursement for opening of new industries and expanding existing ones registered a negative growth of 0.51 per cent in the recently concluded financial year compared with that of 19.93 per cent growth in the FY 2012-13 due to political unrest and uncertainty. According to the Bangladesh Bank data released on Thursday, scheduled banks and non-bank financial institutions disbursed Tk 42,311.32 crore in industrial term loans in the FY14 against Tk 42,528.31crore in the FY13. Industrial term loan disbursement in the FY12 was Tk 35,278.10 crore. BB officials said that the businesspeople had adopted a ‘wait and see’ approach to expansion of their industrial units amid the political unrest centring the January 5 general elections. The trend put an adverse impact on the industrial sector, they said. Four state-owned commercial banks — Sonali, Janata, Agrani and Rupali — and four specialised banks — Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Development Bank and BASIC Bank — disbursed Tk 1,393.65 crore and Tk 1,317.34 crore respectively in industrial term loans in the FY14 against Tk 5,723.75 crore and Tk 1,455.50 crore in the FY13. Industrial term loan disbursement by the foreign banks also decreased to Tk 1,281.10 crore in the FY14 from Tk 1,746.42 crore in the FY13. Term loan disbursement by the private commercial banks, however, increased to Tk 32,519.19 crore in the FY14 from Tk 28,719.74 crore in the FY13. A credit is treated as term loan tenure of which crosses one year while the loan with less than one year of tenure is treated as working capital, said a BB official. The businesspeople usually take the industrial term loans to set up new industrial units or to expand their existing industrial units, he said. The country’s industrialisation process has recently faced a stagnant situation due to the political unrest resulting that the term loan disbursement posted the negative growth in the first nine months of the FY14, he said. Industrial term loan disbursement may decline further in this financial year if the present political uncertainty persists, the official said. Besides, a number of industries have been facing production crisis for long due to the prevailing power crisis and gas shortage. ‘For this reason, entrepreneurs have failed to expand their business. As a result, they are reluctant to apply for bank loans,’ he said. Against the backdrop, the year-on-year private sector credit growth declined to 11.39 per cent in May from 11.86 per cent in April of this year. Such type of slow pace in industrial term loan disbursement will also impact negatively on the GDP growth, the official said. The BB data, however, showed that the overall industrial loan disbursement posted a 15.59-per cent growth in the FY14 compared with that of 30.13 per cent growth in the FY13 due to a higher growth in the working capital. Banks and NBFIs disbursed Tk 1,68,413.91 crore in industrial loans in the FY14 against Tk 1,45,693.87 crore in the FY13. Industrial loan disbursement in the FY12 was Tk 1,11,953.08 crore. The defaulted loans in the industrial sector also declined by 2.10 per cent to Tk 15,225.90 crore in the FY14 from Tk 15,553.05 crore, according to the BB data.