Syed Mahbubur Rahman, MD and CEO, Mutual Trust Bank Ltd speaking to the industry stakeholders and concerned government officials at the video conference organised by PATA BD Chapter held to discuss post COVID-19 recovery
Dhaka: The businesses in the travel and tourism sector falls under the category of Cottage, Micro, Small and Medium Enterprise (CMSME). And already there are loan facilities available categorised by Bangladesh Bank for such enterprises. On top of it, the efforts of the tourism board and ministry of the country to incorporate the sector into the stimulus packages announced by the government separately will further ensure the companies receive the loans.
Syed Mahbubur Rahman, MD and CEO of Mutual Trust Bank Ltd said this recently during a session of the weeklong video conference titled PATA Talk During Lockdown organised by Pacific Asia Travel Association Bangladesh Chapter.
Among the stimulus packages, only the garments industry will receive its allocated amount of BDT 5 thousand crore directly. But the other packages, BDT 30 thousand crore for large corporations, BDT 20 thousand crore for CMSME etc, have to be mobilised by the banks. Now, Rahman raised a doubt whether the schedule 59 or 60 banks of the country have enough liquidity to provide these loans the government has announced.
The banks can charge only 9 per cent interest, of which the government will pay 4.5 or 5 per cent and the customers will pay the rest. However, the banks' cost of fund remain over 7 per cent since the banks are not being able to bring down the cost of deposit, Rahman informed.
He expressed that even before the COVID-19 outbreak, when the country was witnessing a growth of 8 per cent in GDP, the banking industry was in a very fragile state. And after the outbreak it has worsened.
The garment industry is expecting a loss of USD 6 billion currently. And the banking sector is largely dependent on garments. Remittance has also drastically decreased, another industry the banking sector relies on as well, Rahman added.
On the other hand, he mentioned that certain initiatives taken by the Bangladesh Bank have helped the private banks in this regard. For instance, Bangladesh Bank has relaxed an amount of 1.5 per cent for Cash Reserve Requirement (CRR). Due to which the banking sector received almost BDT 18 thousand crore liquidity. Also the sector got a relaxation of 2 per cent in advance deposit ratio. These have led the banks to put some cash into loanable funds.
Also the current scenario imposes another challenge in giving out loans, Rahman pointed out. In order to provide customers with loans, the banks need to be confirmed about the fact the customers are actually being able to use the money. Due to the lockdown, many are unable to operate their businesses. In such circumstances the banks will find it very difficult to provide loans.
"These packages require a normal scenario where everything is operational. We are yet to get there. Everything is uncertain till now."
"Nonetheless, it is the banks' job to provide loans," Rahman urged.
Customers can apply now to any schedule bank in the country for the packages government has announced. However, Rahman suggested approaching the bank a company already has transactions with.
To provide loans, the banks will look into credit reports of customers. This includes credit history or record, account relationship with the bank, future business potential etc because the banks have to make sure that the customers will be able to pay the money back.
"We will see how your business was beforehand and what future potential it holds. If all checks well, then we will definitely take extraordinary steps since extraordinary times require extraordinary measures," Rahman said.
Therefore, all may not be able to benefit from the packages, but some surely will, Rahman concluded.