en are unwilling to take loans from them. Due to the absence of borrowers, deposits of the clients remain idle in commercial banks. Moreover, local banks have become the guarantor of the foreign loans instead of providing loans to traders. A Bangladesh Bank research shows that 203 private companies of the country took foreign loans totalling $553.62 crore (equivalent to over Tk 43,000 crore) from 2009 to March 2014. The foreign loans are being used to import capital machinery and expand factory buildings. The amount of loan that businessmen took from foreign sources is 1.49 percent of the country’s GDP. The average rate of interest of this loan is 4.5 percent while the interest rate of the local commercial banks is 14 to 18 percent. On the other hand, the local banks cannot finance big industrial projects due to liquidity crisis and for this reason, local businessmen are depending on foreign loans, a BB statement said. Experts said local businessmen would not have approached foreign banks if the interest rates on loans from local banks had been relatively low, because foreign loans involve some risks. In case of repayment, borrowers’ costs will rise if dollar becomes stronger against taka. So businessmen are converting their foreign loans into local currency. They also said local banks should cut high interest rates for bringing back businessmen from the low interest rates. The bank interest rate should be brought down to a single digit unless local banks face a big risk. Dr Salehuddin Ahmed, former governor of Bangladesh Bank, told this correspondent, “At first, we have to utilise opportunity for our local banks’ capacity to disburse loan. There are many small traders in the country who have less capital. They should be cooperated. We should think how we reconsider an interest rate.” He also said that if the banks want they can reduce their interest rate. Classified loan is the main reason for high interest rate. Besides, the banks spend a lot of money during decorating their branches. The interest rate will come down from 11 to 10 percent if the distance from the banks. As a result, many local banks cannot disburse loan according to their targets. Also they cannot fulfill the target fixed by Bangladesh Bank’s monetary policy for the private banks. In the first six months of the current fiscal 2014-15, the highest credit growth of private commercial banks has been fixed at 16.5 percent. The growth is very low till October. Since long, local businessmen have been pressing a demand for opening a door for taking loan from foreign sources. After the stock-market scam, local banks have been facing liquidity crisis. At that time, most of the local banks lost their ability to finance the country’s businessmen. In this context, Bangladesh Bank has opened the door of foreign loan facilities for businessmen. Private companies took loans worth $41.26 crore in 2009, $30,27 crore in 2010, $93.63 crore in 2011 and $157.95 crore in 2012 from foreign sources. But due to political turmoil in 2013, the amount was $155.53 crore in 2013. Bangladesh Bank conducted a survey on different companies who took foreign loans. RMG, footwear, knitwear, agricultural goods, transport, telecommunications, shipping, power, drug, cement and steel sector took $89.24 crore foreign loan from 2007 to 2013. The loans were spent on importing capital machinery and expansion of factory buildings. One company aside, mostly spent the loans on productive sector. Sohel RK Husain, managing director of The City Bank, said, “There are some impacts of getting foreign loans. In future, the volumes of foreign loans will not rise. Now local commercial banks have reduced interest rates.” “During the 2013 political turmoil, many businessmen expressed their interest to take low-interest foreign loans. At that time, some foreign loans came to the power and RMG sector,” he added.
Friday, December 19, 2014
Businessmen opt for foreign loans as interest rate low:Daily Sun
en are unwilling to take loans from them. Due to the absence of borrowers, deposits of the clients remain idle in commercial banks. Moreover, local banks have become the guarantor of the foreign loans instead of providing loans to traders. A Bangladesh Bank research shows that 203 private companies of the country took foreign loans totalling $553.62 crore (equivalent to over Tk 43,000 crore) from 2009 to March 2014. The foreign loans are being used to import capital machinery and expand factory buildings. The amount of loan that businessmen took from foreign sources is 1.49 percent of the country’s GDP. The average rate of interest of this loan is 4.5 percent while the interest rate of the local commercial banks is 14 to 18 percent. On the other hand, the local banks cannot finance big industrial projects due to liquidity crisis and for this reason, local businessmen are depending on foreign loans, a BB statement said. Experts said local businessmen would not have approached foreign banks if the interest rates on loans from local banks had been relatively low, because foreign loans involve some risks. In case of repayment, borrowers’ costs will rise if dollar becomes stronger against taka. So businessmen are converting their foreign loans into local currency. They also said local banks should cut high interest rates for bringing back businessmen from the low interest rates. The bank interest rate should be brought down to a single digit unless local banks face a big risk. Dr Salehuddin Ahmed, former governor of Bangladesh Bank, told this correspondent, “At first, we have to utilise opportunity for our local banks’ capacity to disburse loan. There are many small traders in the country who have less capital. They should be cooperated. We should think how we reconsider an interest rate.” He also said that if the banks want they can reduce their interest rate. Classified loan is the main reason for high interest rate. Besides, the banks spend a lot of money during decorating their branches. The interest rate will come down from 11 to 10 percent if the distance from the banks. As a result, many local banks cannot disburse loan according to their targets. Also they cannot fulfill the target fixed by Bangladesh Bank’s monetary policy for the private banks. In the first six months of the current fiscal 2014-15, the highest credit growth of private commercial banks has been fixed at 16.5 percent. The growth is very low till October. Since long, local businessmen have been pressing a demand for opening a door for taking loan from foreign sources. After the stock-market scam, local banks have been facing liquidity crisis. At that time, most of the local banks lost their ability to finance the country’s businessmen. In this context, Bangladesh Bank has opened the door of foreign loan facilities for businessmen. Private companies took loans worth $41.26 crore in 2009, $30,27 crore in 2010, $93.63 crore in 2011 and $157.95 crore in 2012 from foreign sources. But due to political turmoil in 2013, the amount was $155.53 crore in 2013. Bangladesh Bank conducted a survey on different companies who took foreign loans. RMG, footwear, knitwear, agricultural goods, transport, telecommunications, shipping, power, drug, cement and steel sector took $89.24 crore foreign loan from 2007 to 2013. The loans were spent on importing capital machinery and expansion of factory buildings. One company aside, mostly spent the loans on productive sector. Sohel RK Husain, managing director of The City Bank, said, “There are some impacts of getting foreign loans. In future, the volumes of foreign loans will not rise. Now local commercial banks have reduced interest rates.” “During the 2013 political turmoil, many businessmen expressed their interest to take low-interest foreign loans. At that time, some foreign loans came to the power and RMG sector,” he added.
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