Search for China alternative activated

Several banks and entrepreneurs are considering alternative sources for capital machinery and raw materials sourced from China following the Coronavirus outbreak in China’s Wuhan province, said Ataur Rahman Prodhan, managing director of Sonali Bank, the country’s largest lender.

Bangladesh imports various raw materials, including fabrics, and other products from China. However, shipments from the world’s most populous country have slowed in the face of the viral epidemic.

Now, entrepreneurs are searching for a suitable alternative country to open new letters of credit (LC) and import substitute products for the time being, he said at a media briefing held at the Sonali Bank head office in Motijheel yesterday.

Prodhan organised the media briefing to discuss the bank’s overall situation and new plan for 2020.

Another major step Sonali Bank intend to take is reduce its default loan percentage to single digits by the end of the year. In 2019, the state-owned lender’s default loans dropped to 19 per cent, down 7 percentage points year-on-year, he said.

The banks recovered Tk 3,000 crore of classified loans and Tk 800 crore in cash against default loans last year.

Now, the bank has Tk 6,700 crore cash capital shortfall, Prodhan said.

Despite the government’s decision to not recapitalise state-owned banks, Sonali will still seek funds from the government to meet their capital shortfall. The bank is also considering issuing bonds.

“Government banks work in the interest of the people, so they should also be extended a hand,” he said, adding that Sonali provides 37 services free of cost.

For instance, Sonali opened LC worth Tk 94,000 crore against the Rooppur nuclear power plant without any commission. If it took the minimum charge, the lender would have received at least Tk 5,000 crore.

The bank also provided a Tk 6,500 crore loan to Biman Bangladesh Airlines for the purchase of seven Boeing aircrafts at just a 0.75 per cent interest rate.

The government plans to purchase more aircraft to enhance Biman’s fleet and Sonali is keen to continue its support, he said, adding that representatives from American aeroplane manufacturer Boeing met with Prodhan last month to discuss financing plans for Biman.

Sonali made a profit of Tk 1,730 crore last year, down 15.53 per cent year-on-year.

In response to a query, Prodhan said that 2,800 applications for rescheduling of default loans were made last year. Of the number, 2,500 applications were approved and about Tk 2,600 crore rescheduled.