• Thursday, Jan 23, 2020
  • Last Update : 09:53 pm

Banks bear the brunt of political turmoil

  • Published at 08:10 pm December 12th, 2013

The country’s banking business is going through a setback for some days now as loan disbursement and repayment of loans came to almost a halt due to the ongoing political unrest.

Bankers have apprehended the extent of non-performing loans (NPLs) might increase by the end of the year, if the situation does not improve.

The extent of classified loans already increased to 12.79% of the total outstanding loans in September from 11.91% in June this year.

The garments sector that contributes most to make money for the banks has been affected badly during the continuous blockades and countrywide shut downs, they said.

Already, the apparel makers have demanded interest waiver as they failed to execute orders, resulting in “forced loan” being created against the letter of credit.

“Readymade garment business is affected heavily due to failure of shipments, which will also affect the banks as the apparel sector keeps banking business healthy,” Exim Bank Chairman Nazrul Islam Mazumder told Dhaka Tribune.

The banks which handled the garment business comprehensively will be affected mostly, but the losses will not be significant, he said.

Maximum five to seven banks like National, Exim, Prime, Islami and Shahjalal Islami are comprehensively involved with garment business, said Majumder, who is the president of Bangladesh Association of Banks (BAB).

How much of the banking business would do better might be cleared this month as some businessmen already facing difficulties in paying loan instalments from the current month.

If the political solution does not calm down within this month, Mazumder said the banking business would fall in the next quarter.

Many businessmen as we see were trying to pay the instalment, but could not make it,” Pubali Bank Managing Director Helal Ahmed Chowdhury said. “Banks NPL will increase at the end of the year, as a result.”

He apprehended keeping the NPL under control would be a big challenge for the banks as transports cannot move and production being hampered due to the political turmoil.

“Banks move with the country’s business. So if the country’s business does not run well, the banks also suffer. Bank business also does not go well due to political situation, which affects all the supply and production chain,” said NCC Bank Managing Director Nurul Amin.

He said the political programmes whatever it may be should be given considering the economic consequence.

“The position or opposition should use their political rights. But if it hampers the economic activities for long term, we will not accept it as banker,”

The production of garment factories remained shut for 21 days out of last couple of months, compelling us to export at discount, said Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Atiqul Islam.

“Forced loan have been created against letter of credit due to cancellation of export orders. As a result, the businessmen could not pay the loan instalments.”

Former BGMEA President Anwar-Ul-Alam Chowdhury Parvez said garment production dropped by 10% due to the current political turmoil. “It’s not possible to sustain the business for a single day with saline.”

Bangladesh Textile Mills Association President Jahangir Alamin said international buyers are now very cautious to place orders as they are confused whether we will be able to comply with the shipment schedule.

“So, it has become difficult for the businessmen to pay the bank loan instalments in due time.”