PCBs double industrial lending

Private commercial banks (PCBs) have almost doubled their stake in industrial term lending outpacing state-owned banks, a domination the latter enjoyed for years, central bank data show.

“With a very high level of past overdue, their (state-owned banks) actual role in industrial lending has become quite minor,” said a senior Bangladesh Bank (BB) official quoting its report of the 2007-08 financial year.

As per the report, the industrial term credit disbursed by all financial institutions in the country last fiscal stood at Tk 20,150 crore.

Of which, 30 PCBs alone disbursed Tk 13,650 crore, which was Tk 7,540 crore in FY 2006-07. Nine foreign commercial banks gave Tk 2,790 crore and non-bank financial institutions Tk 2,390 crore.

On the contrary, four state-owned commercial banks (SCBs) and five specialised banks disbursed only Tk 1,320 crore or 6.6 percent.

Of the amount, Sonali, Janata, Agrani and Rupali banks disbursed Tk 980 crore, while the specialised Bangladesh Krishi Bank, Rajshahi Krishi Unnyan Bank, Bangladesh Shilpa Bank, Bangladesh Shilpa Rin Sangstha and BASIC Bank disbursed Tk 340 crore.

Such loan disbursement by the banks and financial institutions marked a 62.6 percent rise and recovery 50.2 percent to Tk 13,620 crore.

According to bankers, the SCBs' contribution to industrial credit was above 80 percent until 1990, but the situation started getting reversed since the mid-90s with the more private banks' into business.

Shahjahan Bhuiyan, managing director of United Commercial Bank Limited (UCBL), a first generation private bank, said professionalism, services and above all customers' care have helped PCBs improve their stake significantly in lending.

SM Aminur Rahman, managing director of state-owned bank Janata identified some factors for the SCBs' low volume of credit disbursement, which include the credit ceiling set by the central bank, lack in business confidence and the fall in commodity prices in the international market.

“We could not disburse a significant amount of industrial credit in 2008,” said Syed Abu Naser Bukhtear Ahmed, managing director and chief executive officer of Agrani Bank.

He blamed political instability for this poor project financing by the bank.
Janata Bank MD has added another point: “Businessmen also did not come up with new ventures in 2008.”

SM Aminur Rahman, however, claimed that it is the SCBs that still create new entrepreneurs, not the PCBs.

Bhuiyan opposed Rahman's claim on developing entrepreneurship terming his idea 'an outdated one.'

“Now PCBs are creating entrepreneurs, not the SCBs,” he added.

Source: The Daily Star, December 26, 2008