Special fund for industrial loans

With an aim to reduce commercial banks’ lending rate for industries, the government is going to form a special fund for providing term loans and operating capitals to new entrepreneurs. The fund will provide industrial loans on single-digit interest rate, said officials. Sources said the central bank has undertaken a project to form the fund taking loans from World Bank and Asian Development Bank.

The government and Bangladesh Bank also would contribute to this special fund for industrial loans. Loan for long and short time operating capitals would be provided from the fund to successful entrepreneurs, and, if needed, loan ceiling would also be raised. A senior central bank official said the bank already has such a fund but it is not being effective in present context due to its small size.

Against this backdrop, the government is stressing formation of the fund to accelerate investment in the country and also to bring about a huge growth of industrial sector. For this purpose, the government would give more concession to commercial banks in order to bring down the interest rate of industrial loans to single-digit.

The banks would be provided with increased supply of money from the above mentioned fund. The government would deposit money in the banks on interest rates lower than other sectors outside the ADP. Eminent economist and chairman of Agrani Bank Dr Zayed Bakht on Tuesday told the media: “Reducing interest rates in a specific sector is easier than reducing interest rates on overall loans. Reducing the interest rate of the industrial loan will increase employment which ultimately will benefit the economic growth. Thus, the formation of a special fund will reduce the interest rate of loan in this sector.”

The central bank sources said as a result of newly obtained policies, interest rate for default loans would start deceasing after June. For this reason, the banks’ money stuck in provisional loans would come to the market, increasing the liquidity flow. Sources said if the foreign loans taken by government is unused, it would also be deposited in the banks. Due to dollar crisis in the market, the central bank has sold $220 crore from its foreign reserve to the banks until May 15, collecting Tk 18,000 crore in return. Liquidity crisis has increased for this reason. The central bank has initiated to release this money in the market, against the recently increased remittance flow.