Use excess liquidity for more lending to productive sector

The central bank yesterday officially asked commercial banks to use their excess liquidity to increase lending to the productive sector, especially small and medium enterprises (SMEs).
In a circular Bangladesh Bank said that entrepreneurs, especially women, are still falling outside regular banking services when it comes to getting loans. Commercial banks should provide loans to sectors that generate employment and strengthen the economy, the circular continued.
In recent weeks the central bank has criticised commercial banks on several occasions for their failure to increase lending to productive sectors. However this is the first time it has used the official channel of its own circular to stress the need for increased
It is believed that a total of Tk14300crore of excess liquidity remained in the banking system till June, 2007.
Sources said the central bank also expressed disappointment at the commercial banks' failure to sanction any loan to women entrepreneurs in the SME sector.
Bangladesh Bank believes that loans are needed, especially in the agricultural sector, to help rebuild infrastructure and livelihoods devastated by the recent floods. To underline this point, the central bank has already changed its earlier stance of implementing a tight monetary policy, preferring an expansionary stance.
It is not possible to overcome the losses in agriculture caused by recent floods if the disbursement of agriculture loans is not increased, said a central bank official.
The central bank has already issued a circular for loan rescheduling through the easing of down payment conditions. Earlier, the BB has also directed that a monitoring cell be formed so that the farmers would not face any harassment in receiving agricultural loans.
There are three refinancing schemes on SME in the central bank to reduce poverty and create employment through expanding SME activities. The schemes are the Small Enterprise Fund-ADB with a fund of Tk 210 crore allocated, Bangladesh Bank Fund with an amount of Tk 300 crore, and EGBMP with a fund of Tk 116 crore.