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BIBM DG: Any large-scale shock in the financial sector to inflict huge burden on the economy. Bangladesh Bank (BB) Governor Fazle Kabir yesterday said over two-thirds of the country’s banks did not disburse loans to new industries and limited the disbursement to old ones.
He called on the banks to come out of this extra-cautious business approach.
He said the banking landscape of Bangladesh was changing rapidly. With the evolution of technology, the entire industry underwent a massive transformation that changed the way financial procedures were carried out, and the way financial institutions operated, the governor added.
The BB governor was addressing a two-day annual banking conference at the Bangladesh Institute of Bank Management (BIBM) at Mirpur in Dhaka.
Fazle Kabir said: “Now we are an import-based economy. We need to enhance export and diversification. In this regard, credit operation and diversification are very important for the banks.”
“Only 20% of banks disburse loan to new sectors or industries while the rest 80% confined their disbursement to old business in the year of 2018,” the BB governor also said.
“The collaboration between finance and technology has led to a radical change in banking operation and services. Alongside benefits, the paradigm shift posed significant challenges to the banks as well as to the regulators. One of the important challenges is the increased compliance and reporting requirements,” he said.
The governor, who is also chairman of BIBM governing body, attended the inaugural session as the chief guest while Professor Shah Md Ahsan Habib, chairman, organizing committee, Annual Banking Conference (ABC) 2019, delivered the welcome speech.
Md Akhtaruzzaman, director general (DG) of BIBM, presented the keynote in the inaugural session.
He said there was a negative attitude by the banks in disbursing loans to new sectors.
“The amount of loan to the agriculture sector fell by 9% year-on-year basis. The ongoing liquidity crunch in the banking sector has left an adverse impact on the disbursement of farm loans.”
He said the ratio of NPLs stood at 10.31% of the total outstanding loans in 2018.
Almost Tk75,000 crore of default loans was pending with the money loan courts because of the drawn-out process to settle the case, he said.
“It is noted in our review that in a bank-based economy like us any large-scale shock in the financial sector would hit the real sector and inflict huge burden on the economy of the country. So the regulatory environment should detect any major event of irregularities at an early stage to undertake preventive measures,” said Md Akhtaruzzaman.
For ensuring standard benchmark understanding discrepancies and reducing the gap in HR practices an HR forum could be formed for all banks, he suggested.
Bangladesh Krishi Bank Managing Director Ali Hossain Prodhania said the country’s GDP (Gross Domestic Product) was growing. So NPLs (Non-Performing Loans) should be going down, he observed.
“Credit growth to GDP ratio should be co-related and NPL ratio with the GDP growth should be negative co-relation. But in some cases, it cannot be maintained,” he added.
NPLs were not only the banking issue it was a national issue, said Krishi Bank MD.
GDP, inflation, deficit in current account, interest rate, money supply and credit growth influenced the NPLs, he noted.
(DT)
