Industrial loans surge 23% in July-September 

Infographic: TBS

Industrial credit disbursement increased by 23% to Tk1.31 lakh crore year-on-year in the July-September quarter of this year, thanks to an increase in import costs of industrial raw materials and capital equipment and low lending rates.

Bankers said import costs have increased in the industrial sector due to the increase in the price of goods in the global market. 

Apart from this, more money is required in LC payments due to an increase in dollar prices in the country, which also has led to a surge in industrial loans, they added. 

Meanwhile, the recovery of industrial loans also increased 22.3% over Tk1 lakh crore in the September quarter from Tk82,637 crore in the same period a year ago.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank Limited (MTB), told The Business Standard, "Our overall private sector credit has grown, so industrial growth will also grow. As the interest rate of our bank loans is low, the volume of loan disbursements has increased."

He also said that since the beginning of this year, the industrial companies' capital machinery and raw materials had been imported extensively. 

As loan repayments have started coming following the deferred benefits during the Covid-19 period, more loans have been created with the money. 

Due to this, the amount of industrial debt has increased.

According to central bank data, the July-September import settlement of the current fiscal year 2022-23 has increased by 35% compared to the previous fiscal year.

Import LC settlement for the current financial year (July-September) was $22.44 billion, up from Tk17.06 billion in the same period of the previous financial year.

In the first three months of the current financial year, the import of capital machinery has increased by 57.34% YoY, and the import of industrial raw materials by 26.96%.

Bangladesh Bank's statistical report says at the end of September 2021, the total amount of loans in the banking sector in the country was Tk15.88 lakh crore. 

At the end of the current September 2022, the total loan amount stands at Tk17.83 lakh crore. Credit growth during this period was 12.24%.

Due to Covid-19, the country's industrial credit was low in the last two years. Industrial loan disbursement in September 2020 quarter was Tk94,819 crore. In 2021, the loan disbursement to the industrial sector was Tk1.66 lakh crore. 

Disbursements of industrial loans were higher in the pre-Covid years. In the July-September quarter of 2019, Tk1.8 lakh crore in loans was disbursed in the sector.

According to central bank data, private sector credit growth was 8.38% in July 2021. After a gradual rise, it reached 11.07% in January 2022. 

The growth slowed slightly to 10.87% in February this year, then continued to increase until August. It fell by 10 percentage points in September and 2 percentage points in October.

CMSME loans increase 24.60%

In the first nine months of the current year, the disbursement of loans by banks and financial institutions to the CMSME sector increased 24.60% to Tk1.6 lakh crore compared to the previous year.

However, the disbursement of loans in this sector has decreased 8.51% to Tk51,677 crore in the July-September quarter this year compared to the previous quarter, according to the central bank's data.

A senior official of the Bangladesh Bank's department concerned expressing concerns over the decline in loan disbursement to CMSMEs in the last quarter, and said, "As per the central bank's plan, banks are to disburse 23% of their total loans to the CMSME sector in 2022, 24% by the end of 2023, and 25% by the end of 2024. But, we believe that the institutions will not be able to reach the target this year."

Last year also, the financial institutions fell short of their CMSME loan disbursement target by around 20%.

However, when asked why the loan disbursement increased compared to the previous year, he said many small and medium businessmen refrained from making new investments during the Covid period. But, now that the situation has normalised, businessmen are also increasing investment, he added.

Asked why the banks are not able to meet their loan disbursement target in the CMSME sector, the managing director of a leading CMSME loan-disbursing bank told TBS, "The operating cost of banks in disbursing loans in this sector is very high. Most banks see this as a hassle. They are more focused on disbursing large loans."

However, the classified ratio of loans disbursed to the CMSME sector is very low compared to other loans, he said, adding, "Hence, good banks are gradually inclined to lend to this sector."