Thursday, April 25, 2024

Banking sector reeling from political unrest

The country’s banking business has severely been affected due to political unrest and frequent shutdowns in the last few months, said top executives of some commercial banks.
They said that both collection of deposits and disbursement of loans had decreased alarmingly amid lower presence of clients in the bank due to the unrest.The bankers said that the default loan in the banking sector might increase further if the political unrest continued in the month to come.
Eastern Bank managing director and chief executive officer Ali Reza Iftekhar told New Age on Thursday that the importers had come under severe pressure as they failed to ship their products in due time because of hartal.
For this reason, the bank liabilities of the importers have already entered in a risky position, he said.
The overdue in loan repayment has recently increased significantly as the businesspeople are now facing a crisis due to the political unrest, he said.
Under the circumstances, the default loan in the banking will increase further in the coming months.
Iftekhar said, ‘The credit-deposit ratio in the banking industry went down massively in the last few months as the businessmen are reluctant to take loan because of the unfriendly business environment.’
According to Bangladesh Bank data till February 7, 2013, the banks’ loan-deposit ratio went down to 76.28 percent, well below the BB’s permitted level of 85 percent. It means the banks now lend Tk 76.28 against a deposit of Tk 100. Some banks’ loan disbursement has declined below Tk 70 against a Tk 100 deposit. The CDR of the EBL is 81.85 per cent.
The commercial banks are now investing in the government securities with a lower interest rate, Iftekhar said.
Pubali Bank MD and CEO Helal Ahmed Chowdhury said the frequent shutdowns had hit the transaction in the banking sector.
He said, ‘The loan repayments by the borrowers have already decreased in the banking sector due to hartal. Due to an unfriendly business environment, the entrepreneurs are not taking loan from the banks like previous scale. As a result, the loan disbursement decreased in the last few months.’
The National Bank additional managing Director Md Badiul Alam said that loan disbursement by the bank had already declined and it would decrease further in the coming days if the political turmoil persisted.
The private sector has come under serious pressure due to the hartal as the credit growth in the sector declined significantly, he said.
BB data showed that the credit growth in the private sector had slumped to 14.83 per cent in January compared to that of 17.79 per cent in the corresponding month of 2012.
Although the central bank took a slightly expansionary monetary policy for January-June of 2013 setting a credit growth target of 18.50 per cent for the period, the credit growth of 14.83 per cent in January was the lowest in last 19 months.
Alam said that the non-performing loans might also increase in the banking sector as the shutdown severely hit the businessmen.
The amount of classified or default loans in the banking sector increased by 88.67 per cent from Tk 22,644 crore in 2011 to Tk 42,723 crore in 2012, the BB data showed.

-With New Age input

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