FE Report
Bangladesh Bank will take harsh measures against habitual defaulters and bad borrowers with a track record of persistent delinquencies, said Bangladesh Bank's chief economist Dr. Biru Paksha Paul on Sunday.
"Bangladesh Bank monitors the recent rise in non-performing loans and has taken some corrective measures to clamp down on classified loans," he said, adding that banks had already been asked to take stricter measures to recover these loans. "We hope to see their descent soon."
"If they fail to take measures and if they do not take hit in their balance sheets for these irregularities, the central bank will not be lenient in this regard," the newly appointed chief economist of the central bank told a workshop on the recent monetary policy.
He, however, said the case of credible borrowers with potential for better business would be reviewed.
Biru Paksha pointed out that the central bank has taken various steps to strengthen supervision so that financial frauds can be minimised. The digital technology has been applied to investigate big financial transactions and loans in order to stop the recurrence of banking irregularities.
Bangladesh Institute of Bank Management (BIBM) organised the workshop to have a better understanding of the central bank's latest monetary policy stance.
In the monetary policy unveiled on January 27, the central bank has targeted average inflation at 6.5 per cent for the fiscal year 2015, slightly higher than the government's target of 6 per cent. It was 7 per cent in the previous fiscal year.
"Bangladesh Bank is committed to maintaining the target of inflation," the chief economist said.
Terming the existing average lending rate of 12.5 per cent high enough to dampen investment vigour, the economist said the central bank would try to reduce the existing spread to encourage the investors.
"Bangladesh Bank has urged the commercial banks to devise ways to reduce the lending rates, but it did not come down along with inflation correspondently," he said, urging banks to lend only creditworthy clients who invest their funds for productive purposes and repay instalments regularly.
Overseas borrowing is now possible at a lower rate than the domestic lending rate, posing threat to the domestic funds which charge higher lending rates, he said. "Some banks with high lending rates may face the problem of excess liquidity if overseas channels of borrowing become gradually available to all potential investors."
The central bank chief economists also observed that the recent lack of vigorous investment scenario while devising this monetary statement for the second half of the current fiscal attributing most of the reason to the volatile political situation where monetary policy has no control. The central bank is still determined to brave the adversity and continue its resolute stance on investment stimulation, he said.
Taking into consideration the recent trend in remittances, private credit growth, and both export and imports, Bangladesh provides a projection of economic growth that ranges from 6.5 per cent to 6.8 per cent. "The growth momentum that the country has achieved over the last decade must continue and should be energised further to help the economy graduate to the middle-income status by 2021," said the economist.
Since Bangladesh achieved commendable growth stability, the standard deviation of growth is respectively low. "We do not expect much deviation from the central bank's forecast. If overall political or business environment improves, the forecast will also be revised," he added.
Held at the BIBM conference room, the workshop was addressed, among others, by Bangladesh Bank former deputy governor Khondkar Ibrahim Khaled, BIBM Director General Dr. Toufic Ahmed Choudhury and BIBM Director Dr. Shah Md. Ahsan Habib. A good number of bankers, academics and researchers also attended the workshop.
mzrbd@yahoo.com
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