Bank credit falls for unrest

Bank loans decreased 0.98 percent or Tk 5,197 crore in January compared to December mainly due to political unrest.

Banks' total outstanding amount stood at Tk 523,558 crore on January 29, which was Tk 528,755 crore on December 31, according to central bank statistics.

Even if no new credit was given out, the interest imposed on the outstanding amount would have increased the loan figure for January. But that was not the case. 

With investment remaining stagnant for political uncertainties, the year-on-year credit growth decreased 0.24 percentage points in January from December, to stand at 13.75 percent.

Many factors like the nonstop blockade, violence and seasonal effects are responsible for the fall in credit, bank officials said.

Investors are unwilling to make fresh investment in the prevailing situation, Anis A Khan, managing director of Mutual Trust Bank, told The Daily Star.

Rather than becoming defaulters, investors prefer not taking any new loans, he said.

Khondkar Ibrahim Khaled, former deputy governor of Bangladesh Bank, said the anarchic situation in the country has led to a sluggish trend in trade and commerce. It is natural that the situation would have an adverse impact on banks' credit situation, he added.

The outstanding amount may also drop if banks' loan realisation goes up and no new loans are given, both Khaled and Khan said.

If loans are written off, the outstanding figure may also drop, said Khaled. Khan said banks imposed the interest for profit taking in December to close their year-end accounts, which raised the outstanding figure; it was later adjusted in January, which is why the credit figure dropped.

Not only are clients reluctant to take new loans, many businessmen, especially those dealing with garments accessories, are not making repayments, officials said.

The manager of a private bank branch in Old Dhaka said banks give various loans for working capital or trading purposes every month. But the demand for such loans has dropped for the political situation, and the banks are cautious to grant credit too, he said, asking not to be named.

According to Bangladesh Bank data, the loan figure for four state banks fell 0.53 percent in January from the previous month to stand at Tk 99,924 crore.

Except for Rupali Bank, credit of Sonali Bank, Janata Bank and Agrani Bank fell during the period.

The largest bank of the country, Sonali, saw a drop in loans in both December and January. Its outstanding figure was 2.13 percent lower in January from the previous month.

Pradip Kumar Dutta, managing director of Sonali Bank, told The Daily Star that some of the bank's biggest clients are state-owned enterprises like Bangladesh Petroleum Corporation and Bangladesh Chemical Industries Corporation. In recent times, their financial position is better and hence, they are not taking much loan from banks, Dutta said. In January, private banks' outstanding credit fell 1.18 percent to Tk 366,388 crore from that in December.

The private banks' year-on-year credit growth in January was 16.92 percent, dropping from 17.51 percent in the previous month.

Of the total credit, private banks account for a 70 percent share. Islami Bank accounts for 12 percent of loans given by private banks; its outstanding loan figure also dropped 1.19 percent in January.

Foreign banks' loans during the time went down 0.96 percent to Tk 23,299 crore.

However, the foreign banks witnessed a 2.17 percent year-on-year decline in loans in January, which was almost the same in December.