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MCCI calls for export-friendly exchange rate

Star Business Report
The Metropolitan Chamber of Commerce and Industry yesterday called for an exchange rate favourable to exports and remittances to help make up for the losses to the economy due to political turmoil.
The chamber, in its reaction to the central bank's monetary policy for the second half of fiscal year, however, hailed Bangladesh Bank's "determination to support a market-based exchange rate while seeking to avoid excessive exchange rate volatility”.
While it termed the new monetary policy “business-friendly", it felt a private sector credit growth target of 20-21 percent would be more appropriate in light of the imminent surge in investment followingthe subsidence of political turmoil.
BB kept the private sector credit growth target at 16.5 percent factoring the 11.1 percent growth recorded between July and November, adding it is "more than adequate" to accommodate any significant rise in investment in the second half of fiscal 2013-14.
MCCI, however, welcomed the BB's intent to continue with the policy measures it has already taken to cushion the impact of recent disruptions on domestic businesses.
The measures include disbursement of Export Development Fund to export-oriented sectors at lower interest rate, instructing banks to offer loan rescheduling facilities to genuine borrowers on easy terms and some facilities to small and medium enterprises that have been temporarily affected by political unrest. It also hailed the inclusion of new sectors like leather and ceramics in the EDF and the plan to include more such emerging sectors in future.
MCCI also appreciated BB for encouraging big companies to turn to the stockmarket for their financing needs instead of borrowing from banks, as it will help banks comply with the recently revised regulation on single borrower exposure limits for business groups and make more funds available for small borrowers.
The chamber also appreciates that the monetary policy limits the government's bank borrowing target to the same level as before, of Tk 260 billion. "Sticking to the previous borrowing target in money terms rules out any fear of crowding out of private sector credit," MCCI said.
It also lauded BB's move to set up a Tk 2 billion refinancing scheme to stimulate entrepreneurship among low-income rural households.
MCCI, however, expressed concerns about the "growing menace of loans scams" in the banking sector, poor recovery of bank loans that led to a large increase in the volume of classified loans and the falling capital-asset ratio of banks in general.
"The recent Tk 40 billion recapitalisation of state-owned banks by the government with taxpayer's money cannot be considered very prudent as it may cause moral hazard and encourage banks to indulge in more malpractices such as recklessly granting bad loans, weakening of loan recovery efforts and so on."