14 banks, 2 NBFIs face show-cause for not meeting CMSME loan disbursement target

The Bangladesh Bank has served show-cause notices on 14 banks and two non-bank financial institutions (NBFIs) for failing to achieve the Covid-19 stimulus loan disbursement target in the cottage, micro, small, and medium enterprise (CMSME) sector.

They are Agrani SME Financing Company, GSP Finance Company (Bangladesh), Janata Bank, Habib Bank, Woori Bank, IFIC Bank, Meghna Bank, National Bank, NCC Bank, NRB Bank, Pubali Bank, Shimanto Bank, Al-Arafah Islami Bank, First Security Islami Bank, Global Islami Bank, and Standard Bank.     

The central bank said punitive measures would be taken against them if they failed to meet the target by this fiscal year.

A Tk20,000 crore stimulus package was announced for the CMSME sector last year, and the 16 institutions met less than 50% of their disbursement targets until 30 June this year, according to a central bank statement.

Of the 16, GSP Finance Company (Bangladesh) disbursed no loan while Shimanto Bank achieved only 4% of the target, the lowest among banks, the central bank data shows.

Sohail RK Hussain, managing director of the new-generation Meghna Bank, said they could not reach the target due to the Covid-19 lockdown.

He said 121 employees of his bank had been affected by coronavirus, which had also caused delays in disbursement.

The bank's disbursement was 40.3% of its target, but it met 100% of the target for large borrowers.

There is a similar picture in many banks as they are reluctant in lending to small businesses, though these businesses have been affected the most during the pandemic.

Sohail said they had given the central bank verbal commitments that they would meet the full disbursement target by this fiscal year.

Meanwhile, 13 banks and six non-bank financial institutions were able to fully meet the disbursement target.

They are United Commercial Bank, Brac Bank, Uttara Bank, Agrani Bank, Premier Bank, Bank Asia, Mutual Trust Bank, Eastern Bank, Prime Bank, Bangladesh Krishi Bank, Modhumoti Bank, Rajshahi Krishi Unnayan Bank, Commercial Bank of Ceylon, IDLC Finance, IPDC Finance, LankaBangla Finance, United Finance, Bay Leasing and Investment, and Prime Finance and Investment.     

Overall, banks met around 77% of their disbursement targets.

Agrani Bank's Managing Director and Chief Executive Officer Mohammad Shams-Ul Islam said they would try to meet this fiscal year's target as well.

He said they were also focusing on other stimulus packages.

Officials at the Bangladesh Bank said it was very important to disburse the CMSME package loans in order to eliminate economic inequality and create jobs.

They said banks meeting 100% of the disbursement targets deserve praise as they had set an example for other banks.

The government last year announced incentive packages of around Tk1.25 lakh crore to help the economy recover from the Covid-19 fallouts.

Prime Minister Sheikh Hasina announced the CMSME package on 5 April last year.

On 13 April that year, the Bangladesh Bank issued a policy on disbursing loans from the package.