AN English daily reported yesterday that most private banks with huge liquidity excess are now focusing their lending operation to consumers’ credit in the face of poor scope to invest in the industrial sector because the country is experiencing a slippy economic environment for quite a long time. Credit for consumer items is usually considered as stimulus to inflation in the market.
Excess liquidity in banks and staggering remittance without strong demand for investment has left the country’s money market dull to cause private sector credit growth to falter far behind the targets. Experts and researchers said, the country’s macro-economic sluggishness needs to be properly handled to break out of the situation to bring spur in investment to create more jobs and income generating activities in the economy. The dull money market sitting over at least Taka One trillion crore is at the center of the sluggish investment activities resulting from high interest rate in one hand and risk to investment from political uncertainty on the other. The situation is further complicated by huge default loans, poor governance, and unbridled corruption at high places to further shrink investment activities leaving funds unutilized in the hands of banks and other financial institutions.
As we see the dull money market is rather encouraging capital flights and this in turn is encouraging swindling of money from banks in different forms to transfer it abroad. Powerful people are moving out the money to global business centers whereas businessmen were expected to use the fund to set up new business or industry within the country. The capital flight is rampant using over-invoicing and fake trade document. Meanwhile, some businessmen are openly bringing pressure on the government to allow formal investment abroad, because the local investment situation is not free from risks. It means their money would create jobs and income for people abroad while local people will be starving from lack of jobs living in abject poverty.
It is a critical situation when banks are struggling to find investors while many big investors are borrowing from international banks at much lower interest. The problem is with high default loans; which now stands over Tk 56,000 crore requiring banks to make big provisioning against bad loans sending lending rates at quite unaffordable level. Therefore, more local borrowers are now using international credit at low rates; which is a matter of real concern to local banks because they are losing good customers while international banks are going to do brisk business with them. So they are now channeling their lending avenue to consumers’ credit(s) though at a higher interest rate to keep the banks running. But its impact on the economy is rather risky.
Economists believe the dull money market can become highly efficient market overnight if the political climate improves. It is a matter of political leadership to create the investment climate.
Excess liquidity in banks and staggering remittance without strong demand for investment has left the country’s money market dull to cause private sector credit growth to falter far behind the targets. Experts and researchers said, the country’s macro-economic sluggishness needs to be properly handled to break out of the situation to bring spur in investment to create more jobs and income generating activities in the economy. The dull money market sitting over at least Taka One trillion crore is at the center of the sluggish investment activities resulting from high interest rate in one hand and risk to investment from political uncertainty on the other. The situation is further complicated by huge default loans, poor governance, and unbridled corruption at high places to further shrink investment activities leaving funds unutilized in the hands of banks and other financial institutions.
As we see the dull money market is rather encouraging capital flights and this in turn is encouraging swindling of money from banks in different forms to transfer it abroad. Powerful people are moving out the money to global business centers whereas businessmen were expected to use the fund to set up new business or industry within the country. The capital flight is rampant using over-invoicing and fake trade document. Meanwhile, some businessmen are openly bringing pressure on the government to allow formal investment abroad, because the local investment situation is not free from risks. It means their money would create jobs and income for people abroad while local people will be starving from lack of jobs living in abject poverty.
It is a critical situation when banks are struggling to find investors while many big investors are borrowing from international banks at much lower interest. The problem is with high default loans; which now stands over Tk 56,000 crore requiring banks to make big provisioning against bad loans sending lending rates at quite unaffordable level. Therefore, more local borrowers are now using international credit at low rates; which is a matter of real concern to local banks because they are losing good customers while international banks are going to do brisk business with them. So they are now channeling their lending avenue to consumers’ credit(s) though at a higher interest rate to keep the banks running. But its impact on the economy is rather risky.
Economists believe the dull money market can become highly efficient market overnight if the political climate improves. It is a matter of political leadership to create the investment climate.
