Banks show reluctance to get refinance scheme fund

HM Murtuza | Published: 23:13, Aug 12,2020


Disbursement of refinance to the banks from the Bangladesh Bank’s Tk 15,000 crore-scheme, designed to support the banks with liquidity for implementation of the Tk 30,000-crore stimulus package, has drawn little attention in around four months of its formation.

BB officials and bankers said an increase in excess liquidity in the banking system in the first half of this year along with slow disbursement of stimulus loans are the reasons for the banks’ little interest to get refinance.

Immediately after the announcement of the stimulus package by the government, the central bank formed the refinance scheme for quick implementation of the package in April this year.

As per the Bangladesh Bank data, the central bank has so far disbursed Tk 152 crore to four banks.

The amount disbursed to the banks account for 1.01 per cent of the size of the refinance scheme.

The four banks are Prime Bank, City Bank, Trust Bank and IFIC Bank.

Apart from these banks, Agrani Bank’s application for refinance was being reviewed for processing by the BB.

Asked about the reason behind the poor demand for refinance loans, Mutual Trust Bank managing director Syed Mahbubur Rahman said that although the central bank had already approved a major portion of the stimulus loans, disbursements to clients were being processed.

‘Initially disbursement of stimulus loans to the large industries and services was a bit slow and that’s why the applications for refinance loans are not that significant,’ he said.

Demand for the refinance fund by the banks would increase gradually as the disbursement of stimulus loan had gained momentum in the last one month, he said.

As per the central bank rules, the banks were allowed to apply for funds from the refinance scheme after disbursement of stimulus loans to the borrowers.

Before disbursement of loans to the borrowers, the banks are supposed to apply to the BB based on the stimulus loan applications they would be receiving from the borrowers.

Asked about whether the excess liquidity in the banks was the reason behind the low demand for funds, Mahbub said, ‘Considering the existing cost of funds of the banks, there is no reason to avoid the scope of availing funds at the rate of 4 per cent.’

Mahbub, also of the former chairman of the Association of Bankers Bangladesh, also mentioned that the average cost of funds of most banks was around 7.5 per cent.

Under the BB guidelines, large industries and the service sector will get stimulus loans at the rate of 9 per cent from the banks.

Against the disbursed loans, the banks and non-bank financial institutions would be entitled to get 50 per cent refinance from the BB at the rate of 4 per cent.

Speaking about the slow disbursement of refinance, an official of the central bank said that the excess liquidity in the banking system could be the reason.

He said that many of the banks were holding excess liquidity due to poor credit demand since the outbreak of the coronavirus in the country.

The government launched a number of stimulus packages, including the one worth Tk 30,000 crore for large industries and the service sector, so that the businesses can offset losses incurred due to the coronavirus fallout.

The deadly virus was first detected in the country on March 8 this year and has so far claimed hundreds of lives.

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