Under the Covid-19 stimulus package announced by the government, banks and non-banking financial institutions (NBFIs) are still disbursing the loans in the cottage, micro, small, medium or CMSME and large industries at 4% interest to the customers.
The remaining 5% is to be subsidized by the government every three months, but the lenders are struggling as the government has yet to pay the remaining subsidy amount.
According to central bank sources, the banks have not yet received the subsidy money for the March, June, September and December quarters of 2021 due to the reports not being prepared yet.
The central bank has not provided the Finance Ministry with the subsidy data for 2021 and this year.
The central bank termed the process of providing the interest subsidy lengthy and many banks have expressed their dissatisfaction with it.
Officials of commercial banks and the Bangladesh Bank have informed that the lenders did not receive any interest subsidy from the government after December 2020.
On the other hand, according to central bank data, banks and non-bank financial institutions disbursed 34.3% of the Tk33,000 crore funds allocated for large industries as of April 13 of the current fiscal year.
Similarly, lenders loaned 45.7% of Tk20,000 crore set aside for the cottage, micro, small and medium enterprises (CMSMEs) between July and March of the current fiscal year.
Earlier in April 2020, the government unveiled the stimulus package worth Tk 20,000 crore for the CMSME sector through Bangladesh Bank to protect it from the impacts of the Covid-19 pandemic, 77% of which was disbursed.
According to the plan, banks are allowed to charge a 9% interest rate on their disbursed loans. The end-users get the loan at a 4% interest rate, and the government provides 5% as an interest subsidy to lenders.
The tenure of the first round of the stimulus package expired in June last year, prompting the central bank to allocate another Tk20,000 crore for the current fiscal year ending on June 30.
The BB recently sat with lenders to gear up the loan disbursement under the CMSME package, and the lenders requested the central bank to take prompt measures for the release of the interest subsidy.
The scenario is the same when it comes to the stimulus package for large industries as lenders did not receive any subsidy after December 2020.
As per the government decision, lenders are permitted to enjoy an interest rate of 9% on the loans under the stimulus package.
The first round of the stimulus package for the large industries, involving Tk40,000 crore, was unveiled in April 2020 and lenders collectively disbursed 82% of the fund by the end of the last fiscal year.
The size of the fund is Tk33,000 crore this fiscal year.
Md Serajul Islam, spokesperson and executive director of the BB, said that the central bank had to send recommendations to the Finance Ministry on the release of the subsidy after conducting inspections on the loans.
"We will disburse the fund just after getting approval from the Office of the Controller General of Accounts," he said.
Another BB official who didn’t want to be named told Dhaka Tribune that: “The central bank in February requested the Finance Ministry to release the subsidy for the period of January-June last year but the ministry placed it to the Office of the Controller General of Accounts (OCGA), the debit authority of the fund, but it is yet to release the amount.”
“Before finalizing the annual report of each bank, there is an obligation to visit Bangladesh Bank and submit a quick summary report. Inspection work is now underway on the annual report for 2021.”
“Earlier, the inspection work was stopped at different times due to the Covid-19 and that is why it is taking longer to submit the verification report. Work is currently underway to prepare verification reports for the March and June quarter of 2021,” he added.
Officials also said: “This information will be sent to the Ministry of Finance after following some procedures after inspecting all the banks. After that the subsidy money will be released through Bangladesh Bank. However, it will take some time to submit the verification report for September and December 2021.”
Regarding the matter, no officials of the Controller General of Accounts (OCGA) were willing to comment over mobile phones.
Despite the dissatisfaction, on record with the media, the management of various banks has expressed their hope.
Mohammad Shams-ul Islam, managing director of state-owned Agrani Bank, said the money will definitely be available, even if it’s a bit longer.
Earlier, Selim RF Hussain, managing director and CEO of Brac Bank told Dhaka Tribune: “Bangladesh Bank recognized us for providing maximum credit to the CMSME sector last year. Last year, the target was to disburse loans of Tk1,100 crore in the CMSE sector but we have disbursed more than Tk300 crore than the given target, meaning it was Tk1,400 crore. This year we have been given the same goal of Tk1,400 crore, of which 62% has already been disbursed.”
“Yes, many banks may lose self-interest if they do not get subsidy money on time. However, we believe that the government and Bangladesh Bank are working on it and may start allocating the money soon,” he added.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said: “Lenders had selected capable borrowers to disburse the loans during the first round of the packages, but it is a bit difficult to find out efficient borrowers as many borrowers who had taken up loans have failed to pay back on time.”