Monetary, subsidy policies need to be revisited in 2022
As of September 2021, NPLs stood over Tk1.01 lakh crore — 8.18% of the total outstanding loans and Tk1,945 crore higher than the June figure of Tk99,205
Publish : 01 Jan 2022, 09:17 PMUpdate : 31 Mar 2022, 12:56 PM
Economists and bankers believe that the main challenge for the banking sector in 2022 is to redesign financial policies — mainly the monetary and subsidy policies — to fit the new normal.
These two policies are very important for the future of the economy, says Professor Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD).
“After the end of 2021, controlling the dollar exchange rate and inflation have become the biggest challenges for monetary policy. USD is selling at Tk91-92, and last month [November] inflation rate was 5.98%. So, the government has to make the right decision after thinking about those things,” he explained.
Rahman said that as the price of USD is rising, the value of BDT is decreasing.
“And the government has raised the price of diesel; maybe the next proposal for a price hike may be for fertilizer or electricity. So, the government has to make decisions regarding subsidies now,” the economist further said.
Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office, said the loan subsidy facilities have already been extended several times.
“Even then, the business giants are not satisfied. The government is accepting whatever they say, which has started to have a bad effect on the banking sector,” he said.
Asked about the loan moratorium, he said that Bangladesh Bank has provided equal benefits to all for repaying loans — it cannot go on like this.
“Through this policy, the government is harming the entire banking system by giving benefits to the businessmen,” he said.
This year, after two years of Covid-19, policymakers must think twice about giving equal benefits to big and small businesses, the economist said.
Because in the last two years, the non-performing loans [NPLs] are not decreasing, but on the contrary, have increased at the end of the first quarter of the fiscal year, Hussain added.
According to Bangladesh Bank data, as of September 2021, NPLs stood at over Tk1.01 lakh crore, which is 8.18% of the total outstanding loans. This figure was Tk1,945 crore higher than the June figure of Tk99,205 crore.
Meanwhile, Managing Director and CEO of Brac Bank Selim RF Hussain thinks that banks will be under a lot of pressure this year if they do not make the right decisions at the right time.
“The banking sector may be under pressure this year on a number of issues, one of which is to provide loan assistance to the megaprojects, and which is related to the forbearance policy. If the loans given in the stimulus packages are not repaid on time, the management of banks will become very difficult,” he said.
“If the government starts borrowing again from the banks to meet the budget subsidies, the situation will become more difficult,” warned the banker, who is also the new chairman of the Association of Bankers Bangladesh (ABB).
Professor Rahman agrees with these concerns.
The government and the central bank have taken timely decisions in the last two years on a number of issues, including stimulus packages and credit subsidies, said Rahman.
“But now, unless the loans disbursed in the stimulus packages are deposited back to the banks, this will have a bad effect. NPLs are rising, so it will be difficult for the government to borrow money from banks or domestic sources,” he said.
“But hopefully, foreign aid can be received. And in that case, the challenge will be to ensure proper use of that money by formulating the right policy,” the CPD distinguished fellow said.
Asked about the issues that need to be addressed in the banking sector in 2022 to overcome the problems that existed in the banking sector in 2021, AB Mirza Azizul Islam, former financial adviser to the caretaker government, said one of the major challenges ahead is to redesigning the country's banking policy.
“In particular, the role of the boards of management in the lending process of the bank — if these reforms are executed properly, the amount of defaulted loans will drop,” he said.
But on the last working day of the year, the government spoke in the voice of those big businesses, Islam said.
“Initially, CMSME customers were given 15% loan repayment facility instead of 25%, which was a really good decision. But with CMSMEs in the forefront, this facility was made open to all. It was said to be 25% throughout the year but on the last day, it was said that if you give only 15% then, no one will be a defaulter. If this continues this year, the situation in the banking sector will become worse,” he said.
Monetary, subsidy policies need to be revisited in 2022
As of September 2021, NPLs stood over Tk1.01 lakh crore — 8.18% of the total outstanding loans and Tk1,945 crore higher than the June figure of Tk99,205
Economists and bankers believe that the main challenge for the banking sector in 2022 is to redesign financial policies — mainly the monetary and subsidy policies — to fit the new normal.
These two policies are very important for the future of the economy, says Professor Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD).
“After the end of 2021, controlling the dollar exchange rate and inflation have become the biggest challenges for monetary policy. USD is selling at Tk91-92, and last month [November] inflation rate was 5.98%. So, the government has to make the right decision after thinking about those things,” he explained.
Rahman said that as the price of USD is rising, the value of BDT is decreasing.
“And the government has raised the price of diesel; maybe the next proposal for a price hike may be for fertilizer or electricity. So, the government has to make decisions regarding subsidies now,” the economist further said.
Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office, said the loan subsidy facilities have already been extended several times.
“Even then, the business giants are not satisfied. The government is accepting whatever they say, which has started to have a bad effect on the banking sector,” he said.
Asked about the loan moratorium, he said that Bangladesh Bank has provided equal benefits to all for repaying loans — it cannot go on like this.
“Through this policy, the government is harming the entire banking system by giving benefits to the businessmen,” he said.
This year, after two years of Covid-19, policymakers must think twice about giving equal benefits to big and small businesses, the economist said.
Because in the last two years, the non-performing loans [NPLs] are not decreasing, but on the contrary, have increased at the end of the first quarter of the fiscal year, Hussain added.
According to Bangladesh Bank data, as of September 2021, NPLs stood at over Tk1.01 lakh crore, which is 8.18% of the total outstanding loans. This figure was Tk1,945 crore higher than the June figure of Tk99,205 crore.
Meanwhile, Managing Director and CEO of Brac Bank Selim RF Hussain thinks that banks will be under a lot of pressure this year if they do not make the right decisions at the right time.
“The banking sector may be under pressure this year on a number of issues, one of which is to provide loan assistance to the megaprojects, and which is related to the forbearance policy. If the loans given in the stimulus packages are not repaid on time, the management of banks will become very difficult,” he said.
“If the government starts borrowing again from the banks to meet the budget subsidies, the situation will become more difficult,” warned the banker, who is also the new chairman of the Association of Bankers Bangladesh (ABB).
Professor Rahman agrees with these concerns.
The government and the central bank have taken timely decisions in the last two years on a number of issues, including stimulus packages and credit subsidies, said Rahman.
“But now, unless the loans disbursed in the stimulus packages are deposited back to the banks, this will have a bad effect. NPLs are rising, so it will be difficult for the government to borrow money from banks or domestic sources,” he said.
“But hopefully, foreign aid can be received. And in that case, the challenge will be to ensure proper use of that money by formulating the right policy,” the CPD distinguished fellow said.
Asked about the issues that need to be addressed in the banking sector in 2022 to overcome the problems that existed in the banking sector in 2021, AB Mirza Azizul Islam, former financial adviser to the caretaker government, said one of the major challenges ahead is to redesigning the country's banking policy.
“In particular, the role of the boards of management in the lending process of the bank — if these reforms are executed properly, the amount of defaulted loans will drop,” he said.
But on the last working day of the year, the government spoke in the voice of those big businesses, Islam said.
“Initially, CMSME customers were given 15% loan repayment facility instead of 25%, which was a really good decision. But with CMSMEs in the forefront, this facility was made open to all. It was said to be 25% throughout the year but on the last day, it was said that if you give only 15% then, no one will be a defaulter. If this continues this year, the situation in the banking sector will become worse,” he said.
Topics: