Md Mehedi Hasan

Banks in Bangladesh are increasing their investments in Treasury bills and bonds to net higher profits from the rising interest rate, a development that has squeezed the availability of loans for borrowers.

Bangladesh’s foreign currency reserves are set to receive as high as $2 billion this month, which may send the total to nearly $21 billion, handing a much-needed relief to the US dollar supply.

The services have received lukewarm responses from the targeted customers because they were launched hastily and lack user-friendly features and campaigns were not run to make them popular. Besides, there is no incentive and banks are unwilling, industry insiders said.

These credit bureaus will work to determine credit standards by analysing borrower data before sharing it with banks, which will help financial institutions make informed decisions, said the central bank guidelines on the licencing, operating and regulating of credit bureaus.

However, NPLs rose 38.5 percent year-on-year to Tk 1,82,295 crore by the end of March, accounting for 11.11 percent of the total loans disbursed in the banking system, according to central bank data.

Default loans in the banking sector of Bangladesh hit an all-time high of Tk 182,295 crore, but no reform programme to reduce it has been announced in the budget for the upcoming fiscal year.

Bad loans rose by Tk 36,367 crore in just three months

As new finance minister Abul Hassan Mahmood Ali gears up to place his first budget for FY25, the lack of good governance in the banking sector remains a widely discussed issue.

Mercantile Bank PLC used to emphasise corporate lending but now the private commercial lender plans to redirect the focus in order to bring the unbanked people under the financial system by providing more loans to small and medium enterprises, retail and agriculture, said its top executive.

Seven large borrowers, including AnonTex, Crescent, Ratanpur, and S Alam groups, account for 57 percent of the total default loans at Janata Bank, highlighting the risks lenders face if a handful of firms eat up most of the credit.

The interest rate of treasury bonds recently jumped to a 15-year high of 12.75 percent, indicating that government borrowing will become costlier in the months ahead.

The Bangladesh Bank has bypassed its own rules by approving the appointment of Mohammad Shah Alam Sarwar as the strategic adviser of IFIC Bank PLC.

Bangladesh should consider emerging markets that are growing at a healthy clip and offer growth opportunities to drive up exports instead of keep relying on traditional destinations, said Frederic Neumann, HSBC’s Chief Asia Economist and co-head of Global Research Asia.

The chief executives of at least three private commercial banks told The Daily Star that the BB had verbally allowed them to quote Tk 1 more than the exchange rate to collect US dollars amid the ongoing forex crunch.

ICB Islamic Bank, which took shape from the ruins of Oriental Bank in 2008, is now failing to repay the depositors’ money due to severe liquidity crisis, indicating a vulnerable situation of the lender.

Bangladesh’s foreign exchange reserves have been falling since September 2021 despite a series of government initiatives to reverse the trend.

Currently, the government is borrowing heavily from commercial banks using the tool as the central bank has suspended injecting fresh money into the economy to avoid fuelling inflation, which has stayed above 9 percent for the past 20 months.

The deficit in the financial account stood at $9.25 billion in July-March of the current fiscal year, Bangladesh Bank data showed. It was $2.92 billion in the first nine months of the previous fiscal year and $8.46 billion in July-February of 2023-24.

The interest rates on consumer loans, forced loans and overdue loans are likely to go up rapidly in the upcoming months, however.

The FID later backtracked following criticism from different quarters, including the International Monetary Fund (IMF), about the formation of a public corporation since state enterprises have usually underperformed in the country.