Media reports on Wednesday said disbursement of loan under the first stimulus package show that the country’s commercial banks preferred to provide loans to their existing customers from the package, announced in April 2020, instead of providing loan to new customers. The findings of a survey titled ‘assessment of stimulus packages on Covid-19’ conducted by Bangladesh Institute of Bank Management (BIBM) show, out of 1,788 sanctioned loans under the first stimulus package only eight new borrowers got the loans. Another report said the banks are less keen on giving loans under the second round of stimulus packages this time as many clients are in trouble to pay off their current debts under the first stimulus package – a development that may hurt the economic recovery.
Lenders are also cautious about loan operations as the central bank has beefed up monitoring on how stimulus funds are being used. Banks disbursed only 9 per cent of Tk 20,000 crore among the borrowers of the cottage, micro, small and medium enterprises (CMSMEs) between July and October this year, according to Bangladesh Bank data. We must say this attitude is not helpful to small businesses to overcome earlier losses.
But bankers say a large number of clients have recently sought the renewal of their current loans taken from the stimulus packages as they are unable to pay installments due to the ongoing business slowdown. Banks feel uneasy with visible risk of failing clients but their reluctance is apparently failing the very purpose of the stimulus packages.
Similarly, banks are also reluctant to disburse loans to borrowers of large industries and service units putting the purpose of the stimulus packages under question. Banks have however reasons to be cautious as many big borrowers have reportedly put stimulus money into the stock market. It appears in the first four months of the current fiscal year, banks disbursed only 14.6 per cent against the central bank’s allocation of Tk 33,000 crore for CMSME the sector. The repayment tenure of the loans, disbursed in the form of working capital, under the two packages in one year. The business slowdown is still hammering the economy despite the sharp declines in Coronavirus infections. As a result, borrowers can’t repay loans and banks are unwilling to renew loans or give new loans, and this turns out to be a big impediment to business recovery.
