Industrial loans were not in great demand last year

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In the October-December quarter of last year, lenders paid 9.93% less to the industrial sector than in the same period of the previous year

Industrial loan disbursements fell 9.93% year-on-year to Tk100,533.54 crore in the fourth quarter of last year due to the economic crisis created by the coronavirus pandemic.

Businesses and corporations take out industrial loans to meet their short- and long-term financial needs, such as financing capital expenditures and business expansion.

In the October-December quarter of last year, lenders paid 9.93 percent less to the industrial sector than in the same period of the previous year, according to the latest data from the Bangladesh Bank .

The country’s lenders generally provide two types of loans to the industrial sector: industrial term loans and industrial working capital loans.

Industrial term loan disbursements contracted 31.84 percent while industrial working capital loans fell 3.87 percent in the fourth quarter of last year, BB data showed.

This reflects the stagnation of the economy due to the pandemic, said Fahmida Khatun, executive director of the Center for Policy Dialogue (CPD).

There has been virtually no industrial expansion, as many industries have halted production in the face of suppressed demand amid the ongoing pandemic, she said.

“This was the reason for the downward trend in industrial loans,” Khatun added.

But it was a good sign that the recovery in industrial loans saw positive growth thanks to the voluntary repayment of some good borrowers and loans rescheduled by lenders.

Banks rescheduled about Tk 13,457.8 crore of overdue loans in 2020, according to central bank data.

Industrial loan recovery increased only 3.68 percent to Tk 92,716.63 crore in the quarter.

Industries took a shock when the government imposed a blanket shutdown of the country on March 26 last year to flatten the curve of the coronavirus, Khatun said.

“Most industries are trying to survive in the midst of the pandemic as the economic recovery has been faltering,” she added.

The faltering growth in imports was a reflection of a collapsing economy and business, said Emranul Huq, managing director of Dhaka Bank.

During the July to December period of the current fiscal year, imports of capital goods fell 37.58 percent while imports of industrial raw materials fell 3.33 percent, according to the reports. BB data.

The future is also uncertain as the second wave of the deadly Covid-19 pandemic hit the country, Huq added.

In the October-December quarter of last year, delinquent industrial loans fell only 1.05% to 70,604.02 crore Tk, while outstanding loans increased by 4.56% to Tk 572,352.29 due to the loan moratorium facility offered by the central bank.

The BB has banned banks from downgrading any loans for borrowers’ failure to make installments this year.

As a result, defaulted industrial loans have not increased as much. Defaulted loans in the sector only increased 0.64% year-on-year to Tk 45,414.94 crore at the end of December last year.

All kinds of borrowers will still have three months until June 30 of this year to repay their loans, with the central bank granting several loan repayment facilities on March 24 once the second wave of the Covid-19 pandemic has hit. hit the country.

Working capital loans, whose repayment periods have already expired, will be treated as regular loans until June 30 of next year if borrowers pay their unpaid interest quarterly, according to a recent BB notice.

Interest on last year’s working capital loans, whose repayment periods have already expired, can be paid by June 2022 in six quarterly installments.

Demand loan borrowers will be able to repay their loans in eight quarterly installments from March of this year to December 2022.

Lenders can’t downgrade loans if borrowers have paid their quarterly installments, the BB said.

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