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Lenin Rahman
The ratio of industrial loan witnessed a robust growth in the post pandemic period as part of the economic revamping mechanism, but the squeezing industrial production and output became the arising concern for maintaining the economic steadiness of the country.
Although Bangladesh Bank is focusing to disburse more loans to the SME and agriculture sector, but the banks are deliberately disbursing higher banking facilities in favour of the industrial sector.
The industrial sector had gained the highest bank credit since the pandemic transmission, but the sector is failing to ensure its normal contribution due to multifarious reasons including the supply chain disruption, resulting from the pandemic adversity and Russia-Ukraine war.
Banking sources said that the financial institutions maintained Tk6.69 lakh crore in outstanding loans in the industrial sector till last year in which over Tk58,143 crore or about 9 percent.
The amount of defaulted industrial loans has kept mounting with 16 banks and non-bank financial institutions (NBFIs) – most of them made the headlines for various scams in the past – being the worst sufferers, which, experts say, is attributable to sanctioning of large loans without proper credit risk assessment.
According to the Bangladesh Bank’s data, banks and NBFIs in the country have some Tk6.69 lakh crore in outstanding loans in the industrial sector until June this year, of which over Tk58,143 crore or about 9% have turned default. Three months ago, the volume of defaulted industrial loans was Tk52,372 crore
Due to the supply chain disruption, the industrial sector is failing to attain the desired level of the export earnings. The decline of apparel exports is posing a constant threat on the entire economic revamping mechanism.
Apart from this, the higher fuel price and inadequate power supply are impeding a constant threat for ensuring smooth production. The stakeholders are forced to purchase the products at a higher price, increasing the inflation across the country.
Meanwhile, Bangladesh Bank data disclosed that loan disbursement to the industrial sector rose by about 20 per cent in the September-December quarter of 2022 compared with the corresponding period of the previous year.
According to Bangladesh Bank data, loan disbursement to the industrial sector increased by Tk 24,804 crore to Tk 1,49,669 crore in the December-end quarter. Such credit flow was Tk 1,24,865 crore in the same period of 2021. Industrial loan disbursement was at Tk 1,28,384 crore in the June-end quarter and Tk 1,31,265 crore in the September-end quarter.
On the other hand, the industrial production and output to the national exchequer declined between 25 to 50 percent on company basis in the recent months mainly for the shortage of raw materials and power. The country’s export earnings in April declined by 16.52 per cent, disclosed the Export Promotion Bureau data.
Meanwhile, the industry insiders claimed that the large stakeholders are misusing the loan money and many of them are involved in the real estate business for their vested interest.
Shymal Kumar Sadhu, a senior official of ONE Bank limited told the Daily Tribunal that the loans to the industrial sector witnessed the sudden growth in the post pandemic period mainly for restarting of the economic activities in the country.
Banks provided higher financial support to the industrial stakeholders at a rate of 9 percent to import raw materials and capital machinery. Considering the higher import cost and devaluation of money against the US dollar are posing a constant threat on the steadiness of the industrial sector.
“Banks are facilitating the stakeholders of the industrial sector to meet the import cost as well as to ensure higher contribution for attaining a sustainable and vibrant economy”, added Sadhu.
Mirza Walid Hossain, President of Jubo Economist Forum mentioned that the large stakeholders have been obtaining the lion share of the banking credit since the inception of Bangladesh.
“Out of the industrial sector, the apparel sector played an appreciable role to generate employment and export, but their output is not satisfactory against the state facility in different times. It is unfortunate for a nation that the big borrowers become willful defaulters. To save the defaulters, the government is facilitating the big borrowers through allowing loan rescheduling and write-off facilities”, added Mirza.
Asking on the misusing of bank credit, Mirza opined that currently the industrial sector is passing through an unfriendly business atmosphere mainly due to supply chain disruption, resulting from the adversity of the Russia-Ukraine war. “It is rational that the production and output of the industry would decline for this unfriendly business atmosphere, but the misusing of state assistance is unfortunate for the whole nation”, he added.
Hu urged the central bank to implement the cautious and strict monitoring system to follow the proper utilization of the bank credit.
Former Bangladesh Bank governor Dr Saleh Uddin Ahmed mentioned that the large stakeholders of the industrial sector are gaining the state facility for their credit worthiness and good relations with the bankers and political patrons.
They are availing the bank credit facility in a hassle-free manner because the government is dedicated to boost the industrial production and economy of the country as well.
“If they misuse the state facility, it is an unethical approach”, added Saleh Uddin Ahmed.
The strict monitoring of the central bank is a must to utilize the bank credit accordingly. Trade based money laundering is posing a threat for attaining a sustainable and prosperous Bangladesh, opined the governor.