FALLING lending rates could be a boon for businesses and consumers in 2015, bankers said.
Bank borrowing costs came down to its lowest level in the last two years. All banks are now offering loans for the corporate sector at 13 percent, which goes down further to single digit for short-term working capital.
At the beginning of 2014, borrowing cost for the corporate sector was 15-16 percent.
The overall situation, including political stability, gave bankers a sense of optimism, and they believe it will bring better growth for the sector this year.
"Political calm, the start of the Padma bridge construction work and an improved energy situation resulted in higher investment in capital machinery in 2014," said Anis A Khan, managing director of Mutual Trust Bank.
Khan, also a vice chairman of the Association of Bankers Bangladesh, a platform of chief executives of banks, sees optimism in exportimport growth and healthy foreign exchange reserves at more than $22 billion in the just-concluded year.
Shafiqul Alam, managing director of Jamuna Bank, said a fall in costs of funds may encourage businesses to come up with new investments. Lending rates dropped to 13 percent in the last few months from 15-16 percent at the beginning of 2014.
Businesses became more confident in 2014 as there was hardly any political violence, including shutdowns, like the previous year. Alam said. "We want the situation to continue in 2015 so that entrepreneurs can take advantage of the low
interest rates."
A rise in call money rates, which increased to 9.22 percent on December 30 from 7.34 percent on the same day a year ago, also indicates that the demand for money is going up.
Though nine new banks went through a rough patch as depositors expected higher rates and borrowers the opposite, they also see a bright time ahead.
"The investment situation is improving slowly amid continued political stability and a fall in borrowing costs," said Muklesur Rahman, managing director of NRB Bank, one of the nine new banks
that began operations in 2013.
The economy was hit hard by confrontational political programmes in the run up to the national election in January last year. Business activities were hampered due to shutdowns and blockades in 2013. A World Bank report estimated the economic loss at about $1.4 billion or around 1 percent of the country's gross domestic product.
Banks' liquidity was also swelling due to poor demand from borrowers. The surplus money pushed many banks not to take deposits at higher rates. Proportionately, lending rates were also coming down.
"I was surprised when a leasing company lent me at a 12 percent interest rate," said Nasiruddin Biswas, chairman and managing director of Nasir Group of Industries. Leasing companies usually charge 2 percentage points higher than what banks do, he said.
Falling prices of commodities -be it fuel oil, cooking oil, gas, milk powder or sugar - will benefit consumers, bankers said.
They also said the role of the central bank, in liquidity and exchange rate management and improving corporate governance, will give a boost to the economy.
However, rising nonperforming
loans are becoming a concern for banks as provisioning against bad loans would erode their profits. On September 30 last year, default loans reached Tk 57,290 crore, which was 11.6 percent of the total outstanding loans.
One of the most talked-about issues in 2014 was a central bank waiver for Beximco Group, for rescheduling Tk 5,245 crore loans of the conglomerate till 2025-26.
Bangladesh Bank stepped in when Salman F Rahman, vice chairman of Beximco Group, in a letter in August pleaded that an extreme liquidity crisis has brought Beximco Ltd, the largest company of the group, on the verge of collapse.
Beximco Ltd owes Tk 4,315 crore to four state-owned banks - Sonali, Janata, Agrani and Rupali - and the restTk 930 crore to three private banks - AB, Exim and National.
The four state banks approved Beximco's loan rescheduling proposal till 2026 - a decision that sparked controversy in the banking industry as it contradicts the central bank's rules on loan rescheduling.
No default loans can be rescheduled more than three times, the BB had said in a notice earlier.
But Sonali Bank has rescheduled Beximco's loans seven times so far. With the latest in November, Sonali rescheduled Tk 982 crore loans of Beximco.
Two private banks - Mercantile and National -- also hit the headlines after the BB had detected massive irregularities in the banks. The central bank later appointed observers to the banks.
The BB in August cancelled Prime Bank's mobile banking licence due to "gross violation of rules" by the company that the bank had appointed to run the service.