Tk1.46 trillion lending spree to revive economy

The government is set to roll out a mega lending plan to combat the economic fallout of the coronavirus pandemic.

In a bid to spur investment and economic activities, the Financial Institutions Division (FID) under the finance ministry has set a Tk80,000 crore loan disbursement target for the state-owned banks.

In its action plan, the FID has also aimed to distribute an additional Tk66,000 crore through non-government organisations involved in microfinance activities across the country.

Officials of the FID say the draft action plan will be finalised within this week.

The FID also plans to make it mandatory for insurance companies to invest a portion of their investible funds in government securities and allow investment of undisclosed income in the capital market.

It also emphasises promoting agriculture through crop insurance, addressing various climate impacts, exempting VAT on premium for crop insurance policies and reducing insurance premium (fire, marine) through cutting down tariffs, step-by-step, to minimise the cost of business in industrial units.

Brokers, merchant banks, asset management companies, credit rating companies and listed companies on the capital market are going to be provided with loan support through the Bangladesh Bank to increase their liquidity. Besides, various sectors including food and beverage, pharmaceuticals, and textiles will be given tax waiver on condition of re-investment.

On Thursday, Senior Secretary to the FID Asadul Islam held a meeting with managing directors and chief executive officers of the state-owned banks to discuss ways to implement this action plan.

The draft action plan, styled "The Financial Institutions Division's action plan to face possible impacts of the Covid-19 outbreak on Bangladesh's economy," says Sonali Bank will distribute loans to the tune of Tk63,020 crore in three fiscal years. Of this, Tk20,020 crore will be disbursed in the ongoing 2019-20 fiscal year, while Tk20,900 crore and Tk22,100 crore will be disbursed in the next two fiscal years, respectively.

The bank will distribute Tk2,600 crore in loans to the agriculture sector from its own fund in the three fiscals. Meanwhile, it will disburse loans of Tk6,120 crore among small and medium enterprises in the current fiscal year, and distribute another Tk54,500 crore in other credit and investment sectors in the said three financial years.

Agrani Bank will distribute Tk3,370 crore to implement various government incentive packages announced to mitigate the economic impacts of the pandemic.

Of the amount, Tk250 crore will be distributed under the Tk5,000 crore stimulus fund created for providing loans to export-oriented industries to pay workers' salaries, Tk70 crore under the refinancing scheme for the agriculture sector, Tk850 crore to the  cottage, small and medium enterprises, Tk2,000 crore to affected industries, and Tk200 crore will be provided to the service sector.

Rupali Bank will distribute Tk125 crore under the stimulus package to pay salaries to workers of export-oriented industries and another Tk500 crore to affected industries and the service sector.

Meanwhile, Bangladesh Krishi Bank (BKB) will disburse Tk13,300.87 crore in loans. Of this, Tk10,000 crore will be used for implementing a fund styled "Low-cost diversified agriculture credit programme" formed jointly with Rajshahi Krishi Unnayan Bank (Rakub).

The BKB will distribute Tk998.84 crore in the agriculture sector, Tk202.03 crore to affected industries and the service sector, Tk800 crore to agro-based industries, and Tk1,000 crore to the service and manufacturing sectors. Besides, the bank will disburse Tk300 crore in loans for poverty alleviation.

Rakub will distribute Tk211.80 crore in the cottage, micro, small and medium enterprise (CMSME) sector. It will distribute another Tk824.95 crore in the agriculture sector and Tk186.20 crore to affected industries and the service sector.

Karmasangsthan Bank will provide Tk300 crore in loans to the fisheries and livestock sector and another Tk500 crore to affected industries and the service sector. The bank will also implement "Bangabandhu Jubo Rin" programme to create self-employment opportunities for two lakh unemployed youth trained under the Directorate of Youth Development and Social Development Foundation.

Meanwhile, Palli Sanchay Bank will introduce family or community-based "Shashyo gola rin". The bank will also distribute loans for rehabilitating families of migrant workers who have returned home or died abroad during the pandemic.

Grameen Bank will implement Tk20 crore "Sangrami Sadasya Karmasuchi" (striving member programme) and Tk100 crore "Punji Punoruddhar Sahayata" (capital recovery support) programmes with its own funding to bring back its pandemic-affected members to normal economic activities.

The Bangladesh House Building Finance Corporation will not impose any extra interest on any borrower who cannot pay installments in the March-May period this year and instead it will extend the deadline of loan repayment by three months. The corporation will also take initiative to increase credit flow to its "zero equity programme" taken on the occasion of Mujib Year.

The Microcredit Regulatory Authority (MRA) will form a microcredit refinancing fund of Tk22,000 crore for a 5-year period under the supervision of the Bangladesh Bank to provide loans to the microcredit financing sector at a comparatively lower service charge. The MRA will also take measures to incorporate microcredit financing institutions to the implementation of government incentive packages announced for the agriculture sector apart from raising the amount of credit given by banks to microcredit institutions to Tk42,000 crore – double the present figure.

It has also been suggested in the draft action plan that the rules and regulations of the central bank are eased so that the microcredit finance institutions can arrange more financing from foreign sources. The MRA will take steps to bring down the annual fee and service charge applied for these institutions from the present 0.15 percent to 0.10 percent.

Asked, FID Senior Secretary Md Asadul Islam said the government is suggesting the state-owned banks and non-bank financial institutions to implement the government-announced stimulus packages and also to take and implement various initiatives on their own to recover the pace of the overall economic activity of the country.

Rupali Bank MD and CEO Obayed Ullah Al Masud told The Business Standard that his bank has already sent its detailed action plan to the planning ministry.

Meanwhile, Agrani Bank CEO Mohammad Shams-ul Islam said all banks will distribute loans as per the action plan prepared by the Financial Institutions Division in order to revive the country's economy.