The Dhaka Chamber of Commerce and Industry on Saturday said that the Bangladesh Bank should develop a mechanism to identify wilful defaulters to check non-performing loans in the country’s banking sector.
A mechanism to identify the nature of defaulters will help banks take necessary safeguard against NPLs, the trade body said in an analysis on the current state and future outlook of Bangladesh economy: private sector perspective.
The DCCI released the analysis at a press briefing held at its auditorium in the capital.
While presenting the report, DCCI president Osama Taseer said that NPL was now the key challenge for the economy.
Most of the banks are charging 11 per cent to 15 per cent for loans, increasing the cost of doing business and investment, he said.
Investors are not in good position and even they are making losses in business due to high interest rate though the volume of trade has been increasing in the country, he said.
He blamed excessive non-performing loans for high interest rate.
He said that there were no alternatives but to ensure good governance in the banking sector, reduce interest rates of savings tools and contain inflation to bring down the interest rate to single digit.
In its analysis, the DCCI said that the government’s incremental dependence on national savings certificates to meet budget deficit weakened the banking sector through diversion of individual deposits to savings tools from banks.
It found that non-performing loans and shortage of liquidity caused contraction of private sector credit growth.
The government should also focus on domestic revenue mobilisation to reduce dependency on bank borrowing and national savings certificates.
The tax net needs to be expanded along with increasing non-tax revenue sources to reduce the tax burden on existing tax payers, it said.
It said that private investment remained stagnant within 22 per cent to 23 per cent of GDP over last six years. Inadequate infrastructure and high cost of doing business challenge the desired private sector investment, it said.
The DCCI recommended expediting reform initiatives, ensuring quality infrastructure investment, focusing institutional and policy reforms and rationalising corporate tax rate for increasing private investment.
It also suggested developing a comprehensive strategy for export basket diversification and new market access.
Signing free trade agreements with potential countries and emphasising economic diplomacy to reduce non-tariff barriers are also needed to increase export, it said.
The trade body also sought special attention to leather, pharmaceutical, small and medium enterprises, energy and power sectors to boost the economy.
The trade body also sought special concentration on technical education for improving the situation of skilled labour force and professionals.
Regarding the capital market, it said that absence of bond market, lack of good companies and corporate governance limited the potentials of the country’s capital market for long-term financing.
DCCI senior vice-president Waqar Ahmad Choudhury and vice-president Imran Ahmed were also present, among others, at the briefing.
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