Growth of industrial loan disbursement fell to a five-year low in fiscal 2016-17 despite a sharp decline in interest on lending.
Industrial loan disbursement registered growth of 13.51 percent in the last fiscal year compared to 20.77 percent a year ago, according to data released by the central bank yesterday.
An expert and a banker said poor infrastructure and a lack of energy held back new private investments and expansion of existing ones despite political stability prevailing for over two years.
Together, banks and non-bank financial institutions disbursed Tk 300,672 crore in FY17, up from Tk 264,887 crore a year ago. They disbursed Tk 219,339 crore in FY15.
AB Mirza Azizul Islam, a former caretaker government adviser, told The Daily Star yesterday that businesspeople had long been facing the problem of transporting merchandised goods because of rundown roads and highways.
He said the rate of interest on lending decreased remarkably in the last fiscal year but it failed to put a positive impact on the disbursement of industrial loan because of a demand-side problem.
Some businesspeople are also in uncertainty about setting up fresh enterprises ahead of next national elections, Islam said. A significant number of businesses failed to obtain electricity connections for their newly established units which forced them not to seek bank loans.
Industrial term loan decreased to Tk 62,155 crore in the last fiscal year, down 5.16 percent from Tk 65,539 crore a year ago.
A continuous downward trend in interest rate on lending has failed to encourage businesspeople to take loans from banks due to infrastructural bottlenecks, said Syed Mahbubur Rahman, managing director of Dhaka Bank.
“The situation is yet to change this fiscal year although the private sector credit growth increased in the first two months. The credit growth received a boost as a number of banks financed new projects in the power sector,” he said.
In a positive sign, the growth of industrial defaulted loans came down to 9.85 percent in FY17 compared to 32.62 percent a year ago.
The defaulted industrial loans totalled Tk 30,555 crore in the last fiscal year, up from Tk 27,815 crore registered in FY16.