The central bank should form financial package immediately for small and medium enterprises (SMEs) to tide them over during this period of economic upheaval brought on by the coronavirus outbreak, according to experts.
"The SMEs represent 70 per cent of the whole economy -- GDP growth will nosedive otherwise," said Arif Khan, managing director of IDLC Finance, adding that central banks from all around the globe have already announced packages for their SMEs.
One way would be to by way of refinance scheme, from which the SME sector can get their desired funds to save their businesses.
The Bangladesh Bank should cut the bank rate by at least 2.50 percentage points from the existing 5 per cent for its refinance schemes, experts said.
The bank rate is the rate at which the central bank gives funds to banks from its refinance scheme for disbursing to end users.
Under the ongoing refinance schemes for different sectors, the central bank usually lends money at 5 per cent interest rate to banks, which then disburse the funds to businesses at 9 per cent interest rate.
There are about 10 refinance schemes operated by the BB for businesses, of which six are dedicated to the SME sector.
The six schemes' outstanding loans stood at Tk 1,429 crore at the end of last year.
Although the central bank's monetary policy committee cut the policy rate and reduced the cash reserve ratio on March 23 to tackle the ongoing financial crisis stemming from the coronavirus pandemic, it had not reached a consensus on the bank rate.
"There is no scope to provide financial support to the SMEs without cutting the bank rate," Khan said, while calling for a fresh refinance scheme worth Tk 50,000 crore for the sector.
The scheme should be formed within the lockdown period such that financial institutions can start giving out the funds once regular activities resumes on April 4, he added.
Banks are facing liquidity crunch as clients are withdrawing a good amount of money to make ends meet during the existing crisis period, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank, echoed the same.
Against the backdrop, the central bank should complete the preparation of rolling out fresh refinance schemes, said Rahman, also an immediate past chairman of the Association of the Bankers, Bangladesh, a forum of banks' managing directors.
Lenders will be able to give out loans at the rate of 7-8 per cent if the central bank cuts the bank rate.
But that is unlikely. Asked whether the BB would roll out any refinance scheme, its Spokesperson Md Serajul Islam said that the required preparation would start once the lockdown is lifted.
Cottage, micro and small businesses are feeling the most economic pinch from the impact of the coronavirus pandemic, said Salehuddin Ahmed, a former governor of the central bank.
A large volume of refinance scheme will help them restore their businesses, or else they will be in a moribund state, he said.