Dhaka, Nov 14 (bdnews24.com)—Former central bank Governor Salehuddin Ahmed on Wednesday alleged that a part of the private sector credit was diverted to some other areas where it was not meant to go.
“I conducted a study on 18 branches in Cox’s Bazaar, Netrokona and other areas recently and I found some businessmen took SME loan but it was diverted,” he said at a seminar on State of Banking Sector and Macroeconomic Challenges.
The seminar was organised by Economic Reporters’ Forum at the National Press Club.
“A branch manager told me that he lent Tk 0.1 million and he did not know if the money was spent on the purpose it was taken for.”
The former Governor observed that quality of credit was more important than how much credit is disbursed.
“It may be 19 percent or 20 percent (of credit disbursement target) but proper borrowers should get them.”
Subscribing to the same view, FBCCI President AK Azad said: “There was a media report that 100 big borrowers owed Tk 200 billion and so the money was being occupied by a section of people.”
“General borrowers should also get a pie of the total amount,” he added.
The chief of apex trade body said the growth rate would be even higher if the lending went to proper borrowers.
About two million people enter job market every year and the private sector creates job opportunities for them, he said. “We need 25 percent credit growth to expand the sector.”
“If you fear that inflation would shoot up due to private sector credit growth, then cut down the government borrowing.”
Azad alleged that the commercial banks were charging higher interests after the Bangladesh Bank had withdrawn the cap on lending.
He advised the central bank to take some strict measures to better the growth situation.
Mohammed Farashuddin, another former central bank Governor, said Bangladesh Bank needed to earn operational autonomy to regulate the financial sector.
“Had it taken pro-active measures to identify and stop recent financial sector scandals, the autonomy would have been automatically ensured.”
Citing an example, he said one bank had resorted to fraudulence practice and showed its profit four times the original one.
“Who will take the blame for this? It is the system’s failure,” he said.
Bangladesh Bank Deputy Governor SK Sur Chowdhury said pre-emptive measures would be strengthened in the future.
About new banks, he said: “Bangladesh Bank will not provide licence to nine new banks if the sponsors are tax defaulters or Tk 4 billion for paid-up capital is not white money.”
The Deputy Governor said Bank Company Act would be amended soon and draft amendment of Foreign Exchange Regulation Act, 1947 is at final stages.
Chief economist of Bangladesh Bank Hasan Zaman said private sector credit growth of 20 percent was enough to cater to the need of trade and business but the real challenge is channelling money to all of them.
“In India the private sector credit growth rate was 15 percent and they had 8 percent growth and in Bangladesh it is now about 20 percent and it should be enough to reach the growth target.”
“The main challenge is that the credit should not be concentrated on a couple of hands rather it should be disbursed across the private sector and to do this supervision and regulation are needed,” he said.
Zaman said commercial banks should lower their lending rates as it would reduce the cost of borrowing.
About remittance, he said Bangladesh Bank introduced BB bills to withdraw excess money from the banks.
“Remittance flow increased by about 25 percent due to Eid and Puja combined and the excess money would be withdrawn from the market,” he added.
BRAC Bank Deputy Managing Director Mohammad Mamdudur Rashid said there was pros and cons of technology. “Proper supervision and regulation are needed to face the negative impact of technology.”
ERF General Secretary Abdur Rahim Harmachi gave the welcome address and vote of thanks.
A large number of ERF members attended the programme, presided over by its President Khawza Mainuddin.