Banks’ lending to industries slows

The growth in advances in the form of term loans for industries have slowed down as businesses took a slow approach amidst the ongoing economic uncertainty while banks became conservative owing to a reduction in excess liquidity. 

As of September of this year, banks' advances to industries in the form of term loans stood at Tk 261,654 crore, which was 8 per cent higher year-on-year.

Yet, this was the lowest growth in the last five years, according to Quarterly Scheduled Banks Statistics released by Bangladesh Bank last week.

The amount of term loan for industries, however, declined 0.37 per cent in the July-September period from Tk 262,618 crore at the end of April-June quarter this year.

Working capital financing for industries dropped 1.49 per cent to Tk 266,724 crore in the last quarter compared to that at the end of June this year.

"Demand for large loans is low this year. There is also no demand for syndication this year," said Md Abdus Salam Azad, managing director of state-run Janata Bank.

He said the pandemic affected business and many could not repay loan easily. Of late, the increased cost of the US dollar also affected project financing, he said, adding that the state-run bank approved loans for four or five projects.

"Our term lending has declined but our financing to small and medium enterprises has increased," he added.

The central bank data showed that 35 per cent of advances by bank went to trade financing.

Working capital and advances for term loans for industry accounted for 39.6 per cent of total advancesat the end of September this year, down marginally from that a quarter ago, and one year ago.

Emranul Huq, managing director of Dhaka Bank, said advances were not coming about by that much of an extent at this point in time.

Now the economy is stressed and entrepreneurs are delaying implementing new projects, he said.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said banks were facing pressure from falling liquidity, for which they were not going aggressive in investment.

"We are going conservative, not aggressive as of the past," he said.