Banks want a credit risk guarantee scheme to protect loans under stimulus

Banks have requested the government to consider establishment of a credit risk guarantee scheme for them to protect the loans and advances given under the recent stimulus packages to fight the Covid-19 pandemic.

Ali Reza Iftekhar, chairman of Association of Bankers Bangladesh (ABB), a forum of banks' managing directors, made the call at a video conference meeting with Finance Minister AHM Mustafa Kamal, Governor of Bangladesh Bank Fazle Kabir and Chairman of Bangladesh Association of Banks (BAB) Nazrul Islam Mazumder.

Iftekhar said the financial health of the banks is now most crucial to the recovery of the economy from the impact of coronavirus pandemic as there is no alternative source to support and inject money to the economy.

He, however, commended the government and the Bangladesh Bank for its initiatives and policy supports to make available required liquidity required by the businesses.

Slashing of cash reserve requirement or CRR by 150 basis points to 4 percent will help banks implement the government-announced financial stimulus packages, said Iftekhar, also managing director of EBL.

AHM Mustafa Kamal has advised the banking sector leaders to keep non-performing loands (NPLs) in control as the road ahead of economic recovery would be challenging. He also emphasized on putting a lid on banks operating cost and reduce cost income ratio and also advised cut down of unnecessary cost during this period.

The minister sought inputs from all to develop a bond market for alternate financing of Bangladesh economy.

BB Governor Fazle Kabir has informed the meeting about all the stimulus packages and the ongoing implementation of those and assured the minister that whatever is required to keep the business community and banking sector running Bangladesh Bank will provide all the necessary policy support and guidance.

BAB chairman requested the finance minister and the governor to extend the time frame from June 30 to December 31, 2020 regarding the down gradation of accounts. The BB governor has said he will look into the matte when time comes.

At the end, both BAB and ABB chairmen thanked the prime minister, finance minister, and BB governor for their timely involvement and support during this difficult times.