Seven state-run banks have not disbursed any fund from the central bank’s stimulus fund of Tk 3,000 crore for low-income professionals, marginal farmers and micro-enterprises.
The Bangladesh Bank repeatedly asked them to give out loans from the package in order to speed up the ongoing economic recovery, but they did not pay heed to the instruction.
This has forced the central bank to issue show-cause notices yesterday to the seven — Sonali, Janata, Agrani, Rupali, Bangladesh Krishi, Rajshahi Krishi Unnayan and Bangladesh Development banks.
They have been asked to reply in seven days citing the reason for their failure.
In addition, they will have to submit a detailed plan on how they would distribute loans from the fund in the quickest possible time as part of government efforts to revive the rural economy.
The central bank unveiled the package on April 21 to keep the marginal businesses and farming activities of the low-income groups afloat from the economic hardship brought on by the coronavirus pandemic.
People with no access to banks and non-bank financial institutions will be allowed to get loans from the revolving fund at 9 per cent interest rate.
Microfinance institutions (MFIs) having certificates from the Microcredit Regulatory Authority can give out the loans.
Under the package, the BB will initially provide the fund to banks at 1 per cent interest. Banks will lend to the MFIs at 3.5 per cent interest.
The MFIs will be allowed to charge borrowers a maximum of 9 per cent interest.
Six months have already gone since the unveiling of the package, but the seven-lenders, which are mainly responsible for providing banking service to the financially insolvent, have yet to take any initiative, the central banker said.
This has created a frustrating situation beyond doubt as the lenders have a large banking network in the rural area, he said.
As of June, the total number of branches of the country’s eight state-run lenders stood at 5,208, of which 63 per cent are located in the rural areas.
Of the eight banks, only BASIC Bank approved loans worth Tk 65.85 crore as of October 14, according to data from the central bank.
A good number of private banks have already disbursed a good amount of fund among the marginal people. Forty-two banks signed participation agreements with the central bank to disburse the fund.
The state lenders initially showed a lot of interest in signing the participate agreement to join the disbursement process, but they have continued to show zero performance.
Although some private banks are yet to disburse a good amount of loans, others have already taken different measures to give out the fund.
All banks have collectively approved loans to the tune of Tk 1,332.77 crore, or 44.43 per cent of the stimulus package.
Of the approved fund, Tk 605.66 crore has been given out to the clients, thanks to the good performance of the private lenders.
Agrani Bank has taken different initiatives to disburse the fund, said Managing Director Mohammad Shams-Ul Islam.
“We will submit a credit proposal of Tk 20 crore to our board of directors in the next week to get the approval,” he said.
The entire disbursement target of Tk 40 crore set by the central bank for the bank will be disbursed within this month, he said.
“We have been late in getting into the process of disbursing the fund due to some technical complexities,” Islam claimed.
Bangladesh Krishi Bank usually disburses loans in the rural areas through its branches. But the stimulus fund will have to be disbursed through MFIs and this has initially created some problems for the bank to distribute the fund, said Md Ali Hossain Prodhania, managing director of the state lender.
“We have taken measures to disburse the fund,” he said.
The central bank set a target of Tk 5 crore for the BKB, but Prodhania said that his bank would disburse far more.
Another central bank official said the state lenders hardly pay heed to the BB’s instruction as their regulator is the finance ministry in reality.
The ministry is empowered to appoint managing directors and form boards of state lenders, creating a roadblock to the proper supervisory authority of the central bank.
The finance ministry should put pressure on the state lenders to speed up the loan disbursement process, said an analyst.
Md Ashadul Islam, senior secretary of the Financial Institutions Division, said banks would have to implement the stimulus package on time.
The government will not put up with the failure of the lenders in the interest of the economy, he said.
The progress for some of the stimulus packages has been satisfactory, Islam said.
The government has unveiled 19 stimulus packages amounting to Tk 106,117 crore for various sectors.