Home Bangladesh Incentive loans not for use in unproductive sectors: BB
Bangladesh - August 3, 2021

Incentive loans not for use in unproductive sectors: BB

Staff Correspondent: The Bangladesh Bank (BB) has instructed banks not to provide loans for unproductive sectors under the Covid-19 stimulus packages. The central bank issued the directive to the heads and managing directors of all financial institutions through a circular yesterday.
The Bangladesh Bank in its circular stated that some of the incentives announced by the government were used in unproductive sectors, undermining the real purpose of the incentive packages.
Moreover, in many cases, incentives are being used to deal with other loans of the borrowers, which is absolutely unacceptable.
In this context, the Bangladesh Bank has suggested regular monitoring as well as verification through the internal audit department to ensure proper use of incentive loans after their disbursement to the financial institutions.
The stimulus packages announced by the government to revive the pandemic-hit economy have reached around 1.24 crore beneficiaries as of May this year, said the recent survey report of the Bangladesh Bank.
Only 3,245 large firms have enjoyed 39% of the total disbursed stimulus loans when around one lakh small businesses have received 17% as of May, reflecting how unequally financial packages have been implemented, according to the latest report of the central bank.
According to the Bangladesh Bank Special Publication in July this year entitled “Covid-19 Pandemic in Bangladesh: Policy Responses and its Impact”, the government in collaboration with of the Bangladesh Bank has announced a series of stimulus packages and refinance schemes equivalent to Tk1.284 trillion or 4.59% of the GDP to recover from the Covid-19 related economic losses. The Bangladesh Bank recommended efficient distribution of stimulus funds in various economic sectors and concomitant close monitoring of the end-use of those funds as crucial.
The central bank also urged the banks and financial institutions to place contingency measures to their respective boards well ahead taking into account the future challenges.
In different packages, the government will pay half of the applicable interest and borrowers will have to pay the remaining half.
The Bangladesh Bank also clarified that the interest subsidy will only be given against the loans that are within the specified limit.

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