Loan disbursement through agent banking in April came down close to nil as banks found disbursement of loans through the agent banking channel at the rate of 9 per cent insufficient to realise even the operating cost, including the cost of fund.
In April this year, the government enforced the 9 per cent ceiling on the lending rate.
Loan disbursement through the agent banking wing of the banks was very poor even before imposition of the lending rate ceiling.
The 9 per cent ceiling has now brought disbursement of loans through the channel almost to a halt.
As per the Bangladesh Bank data, the banks disbursed just Tk 0.3 crore in loans in April through their agent banking wings against their disbursement of Tk 57.5 crore in March, the immediate preceding month of the lending rate enforcement.
Replying on why loan disbursement through the agent banking wing had come almost to a halt, Modhumoti Bank agent banking head Mohammad Shahadath Hossain said, ‘It’s the imposition of the lending rate ceiling at 9 per cent.’
The gap between the cost of fund, including operating cost, and the lending rate ceiling is 4 percentage points, Shahadath said.
Collection of monthly instalments on loans is significant in rural areas compared to collection of instalments in urban areas through the banking channel, the agent banking head said.
Collection of instalments in the rural areas require door-to-door visits thus resulting in increased operating cost, he said, adding that otherwise, the loans would turn into non-performing ones.
‘Under the existing circumstances, it is not viable for us to issue credit to farmers or to small and medium entrepreneurs,’ he said, adding, that that was why they had shifted their focus to digital banking were operating cost would be less.
When the government enforced the 9-per cent ceiling on the lending rate for all sorts of loans, economists and bankers had cautioned that loan disbursement to the SMEs would be affected severely.
Even though loan disbursement came to a halt in April, the banks’ collection of deposit through the agent banking wing increased by Tk 201.2 crore to Tk 8,531.5 crore in April from Tk 8,330.3 crore in the previous month.
Asked about whether the agent banking wing had become a source of fund for the banks, Shahadath said that the majority of the banks were doing the same thing.
However, the banks were effectively implementing the prime objective — financial inclusion of the unbanked people by facilitating them with deposit funds, bill payment and collection of remittance by way of bringing them under the banking network, he said.
So far, 26 banks have been granted licence by the central bank to run agent banking services.
The number of agent banking accounts has increased by 2.43 lakh to 67.29 lakh in April from 64.85 lakh in the previous month.
As a result of the increase in bank accounts, inflow of remittance through the banking wing rose to Tk 1,395.3 crore in April against Tk 1,026.2 crore in the previous month.
Shahadath said that the inflow of remittance through agent banking had increased amid the coronavirus outbreak due to the 2-per cent cash incentive against the inflow of remittance through the banking channel.
However, transaction through the wing dropped to Tk 11,472.7 crore from Tk 18,538.1 crore due to imposition of the countrywide shutdown which resulted in lower economic activities.
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