The Bangladesh Bank on Thursday allowed the country’s banks and non-bank financial institutions to increase their lending by 5 percentage points to trade-based cottage, micro, small and medium enterprises (CMSMEs) from the government-announced Tk 20,000 crore stimulus package.
The regulator enhanced the limit for the trade-based small enterprises considering the high demand for loans in the sector, according to a BB circular issued on the day.
The central bank also extended the deadline for the full implementation of the CMSME package to December 31 from October 31 amid a slow loan disbursement by the banks and NBFIs.
As of October, the banks and NBFIs disbursed 42 per cent of the sum among the CMSMEs despite a repeated push from the central bank to complete disbursement at the earliest.
While unveiling the Tk 20,000 crore stimulus fund for the CMSME sector in April, the central bank allowed banks and NBFIs to disburse 20 per cent of their total annual loans to trade-based CMSMEs.
In October, the loan limit was raised to 30 per cent for the trading sector to boost stimulus fund disbursement.
The BB on Thursday further enhanced the ceiling to 35 per cent considering the high demand for loans in the sub-sector.
‘If the amounts of the loans cross 35 per cent, the share of the funds for the manufacturing and service sub-sectors would go down proportionately,’ said the BB circular.
It would not be below 65 per cent combined for the two sub-sectors, it also said.
The central bank also extended the deadline for the banks and NBFIs to execute the stimulus package for CMSMEs by another month.
The BB further enhanced the limit for the trading sub-sector to boost loans disbursement to CMSMEs sector as the disbursement to the sector from the Tk 20,000 crore stimulus fund is not satisfactory, said a senior official of the BB.
Besides, there is higher demand for loans in the trading sub-sector than the manufacturing and service sub-sectors, he also said.
The BB official said that the lenders would get some breathing space to disburse the stimulus fund owing to the extended deadline.
On April 13 this year, the BB, in line with the government’s announcement, issued guidelines on providing working capital facilities amounting to Tk 20,000 crore to the CMSME sector affected by the coronavirus outbreak, setting the interest rate ceiling at 9 per cent.
Of the 9 per cent interest, the government will bear 5 percentage points as subsidy and the remaining 4 percentage points are supposed to be borne by borrowers.
However, the banks and NBFIs were slow to give loans to businesses belonging to the cottage, micro, small and medium enterprise sector.