AN English daily on Thursday reported that a sharp fall in bank credit to private sector mainly due to countrywide ongoing political unrest. As there has been a poor demand for bank loans, in fact no fresh loan was disbursed in the last two months in the wake of the political trouble. Businesses were not able to use most of their already-approved loans due to prevailing risky business climate from the beginning of the year, least to speak of asking for new loans for new projects or opening new shops. Most people are on a wait and see policy until the situation improves. But the most unfortunate thing is that no one in the political leadership seems to be bothering of the perils of business while the entire country is reeling under violence and hostilities causing deaths to people from petrol bombs and arsons and shootouts. People have lost business confidence on investments and it explains why the downswing in bank loans to private sector is at work.
We see that the private sector bank credit is not showing up despite lowering of interest between 12 to 13 percent from 14 to 15 percent a year ago. Moreover banks are suffering from low liquidity for failure to attract more deposits and loan recovery in poor business environment. It partly shows the falling business demand despite lower cost of capital in the murky political environment. Banks have hardly disbursed any fresh loans in the last two months in the wake of plummeting business outlook. Business firms having loan ceiling of Tk 20 crore could hardly utilize Tk 5 crore showing the sluggish investment with consequential fall in import of new machinery and raw materials on one hand and downturn in employment and income generation on the other. So in our view it is not only a bank loan issue, the entire private sector and economy is also facing the crunch.
It comes at a time when the private sector was recovering from the disruptive politics in the second half of the 2013. The new crunch may have yet longer impact as the violence continues and there is no end in sight of the crisis.
We must say bank loan itself is not a business, it is key to opening new business and running existing ones. The fall in loan disbursement thus shows the overall fall in the economy and business. It may only be beefed up of violence recedes to bring back normalcy in national life.
We urge the government and the private sector leaders to end the crisis and restore business environment. There is no alternative to it.
