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NCBs slap Tk 17cr ceiling on loans

REJAUL KARIM BYRON
The nationalised commercial banks (NCBs) have decided not to disburse any loan over Tk 17 crore.
Following an understanding with the Bangladesh Bank in June, the NCBs last month also curtailed loan sanctioning powers of branch officials.
They also asked the branches not to increase lending growth rate beyond five per cent this year. No loan will be more than five per cent of the banks' paid-up capital.
Four NCBs signed memorandums of understanding (MoUs) with the Bangladesh Bank (BB) in June, which restrict their credit activities in the face of huge defaulted loans. The move was taken at the prescription of the World Bank and the International Monetary Fund (IMF).
Following the understanding, the NCBs fixed the maximum limit of loans they can provide. Sonali Bank can approve a maximum of Tk 16.35 crore for a single loan, Janata Bank Tk 12.96 crore, Agrani Bank Tk 12.40 crore and Rupali Bank less than Tk 10 crore.
Sonali Bank has directed its branches to restrict its credit to fisheries, goat-rearing, agro-based industries and some other agriculture-related sectors. It said all other types of new loans should not be approved.
According to banking sources, none of the four NCBs approved any large-scale loans in the last three months.
Two high officials of Sonali and Agrani told The Daily Star that their boards no longer accept new loan proposals.
"The board is concentrating on
loan write-off, loan rescheduling and interest waiver," says a high official of Agrani Bank.
Because of the leash on new loans, the NCBs approved fewer loans in the first six months of this year compared to last year's.
The credit balance of the NCBs dropped by Tk 843 crore on June 30, 2003 from that of December 31, 2002.
If the NCBs want to disburse large loans, they have to do so in syndication with private or foreign banks, according to the MoUs.
Besides, the government asked entrepreneurs to raise funds from the share market for large projects.
The restrictive measures have generated mixed reactions among industrialists.
Yussuf Abdullah Harun, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said while the NCBs need reforms, restrictions on loans is not the solution.
"It will affect industrialisation,"
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he said. "The industries are passing through a crucial time. If we cannot get loans in time, then it will be another bad news for the sector."
"The business community has reasons to be concerned if new entrepreneurs suffer because of bad ones," Harun pointed out.
He doubted whether the alternative measures for fund collection advised by the government would be effective.
President of Metropolitan Chamber of Commerce and Industries (MCCI) Tapan Chowdhury however supported the bar on NCBs.
"This will improve the banking sector's health and reduce undue influence on loan approval," he noted.
"Genuine businessmen will not be affected by the measures. Rather, this will help them get loans," Tapan said.
Dr Zaid Bakht, researcher director of the Bangladesh Institute of Development Studies (BIDS), said, "The reform measures taken by the government and the Bangladesh Bank were very necessary. While restricting credit, steps have to be taken to reach loans to good borrowers. We must reduce dependence on the NCBs and build alternative institutions."