Banks have hastened loan disbursements under stimulus packages with businesses gradually beginning to recover from the pandemic's shocks and public movement returning to normal.
Under the Tk20,000 crore package for small and medium-sized enterprises (SMEs), the Bangladesh Bank approved loans amounting to Tk4,100 crore till August; which was four times higher than Tk510 crore approved till July 15.
The approved loans under another Tk30,000 crore package–meant for large industries–also doubled to Tk20,000 crore in August from July's amount, according to data from the central bank.
Ali Reza Iftekhar, managing director at Eastern Bank and chairman at the Association of Bankers, Bangladesh (ABB), said initially, loan disbursements under stimulus packages were challenging for banks owing to the closure of business activities, and strict conditions for implementing the packages.
Business activities restarted in July, and the Bangladesh Bank also relaxed the rules, helping the banks for smooth disbursement, he said.
The central bank has recently relaxed two more restrictions which will also help to double disbursements in September, he added.
On September 3, the Bangladesh Bank relaxed the condition of a minimum 15% loan disbursement in villages under the stimulus packages. The condition was lifted at the request of the ABB.
The instalment was also reset to be monthly instead of quarterly, according to the circular.
The Bangladesh Bank also asked the banks to complete the full disbursement of loans under the stimulus package for SMEs by October.
In July, the Bangladesh Bank formed a credit guarantee scheme to the tune of Tk2,000 crore to expedite loan disbursement in the SME sector.
This scheme will be adequate to issue guarantees against working capital loans amounting to Tk8,320 crore.
"The banks have accelerated loan disbursements under stimulus packages since July as businesses started to bounce back with rising sales," said Rahel Ahmed, managing director at Prime Bank and also general secretary at the ABB.
He said some large players have even started their repayments as their sales have increased up to 90% of their target since reopening business activities.
"Although loan disbursements under the SME package were slow until July, they picked up in August as many small businesses restarted their businesses," he added.
"Small businesses were most affected by the pandemic, so they took time to resume their businesses," Rahel Ahmed continued.
"Banks found that many small businesses started afresh and they are now submitting required sales documents to avail loans," he said. As a result, loan disbursement under the SME package increased significantly in August.
"Moreover, the Bangladesh Bank relaxed many conditions for implementing the stimulus packages, which also helped banks accelerate disbursements," he added.
The banks also saw consumer goods-related businesses and the health sectors recovering fast, said the ABB general secretary.
"We expedited loan disbursement under the package for SMEs as the Bangladesh Bank has eased conditions," said Md Arfan Ali, president and managing director at Bank Asia.
Bank Asia has already completed its disbursement target of Tk800 crore under the Tk30,000 crore package, he said.
The implementation of stimulus packages has already been reflected in private sector credit growth.
The private sector credit growth which remained sluggish until June, registering below 9% growth for four consecutive months, saw a jump in July.
In July, the private sector saw 9.20% in credit growth, reflecting a sign of the gradual resumption of business activities following the reopening of factories in May.
The credit growth came down to a single digit in November 2019 amid pressure of bringing down the lending rate to 9%.
In this situation, the novel coronavirus outbreak worsened the credit disbursement, dragging the growth down to an 8% level.
In the latest monetary policy declared for the current fiscal year, the Bangladesh Bank showed optimism of rebounding credit growth backed by stimulus packages.
On the back of that, the central bank has set the credit growth target at 14.8% for the current fiscal year against last year's achievement of 8.6%.
Bank executives say the credit demand may increase sharply as soon as the situation returns to normal.
Earlier, in April, the prime minister unveiled stimulus packages of Tk72,750 crore–including Tk5,000 crore for the export sector–to provide financial support to the ailing economy.