Commercial loans from foreign banks in the Bangladeshi private sector have increased significantly, which is creating a pressure on the forex reserves, says a new report.
A recent study by the Bangladesh Institute of Bank Management (BIBM) says foreign loans stood at $11 billion in 2017, up by 24 percent from $4 billion in 2013.
The findings of the report ‘Borrowing from Foreign Sources in Bangladesh: An Anatomy’ were revealed on Thursday during a seminar at the BIBM in Dhaka’s Mirpur.
BIBM’s Research Director Prashanta Kumar Banerjee presented the keynote paper.
The study says foreign credit is highest in the apparel industry, accounting for 24 percent. Power sector comes at the second with 21 percent followed by 16 percent in sweater, 12 percent in dyeing and knitting, 11 percent in textiles, 5 percent in plastic, 3 percent in the service industry and 2 percent in pharmaceuticals.
The central bank strictly monitors the flow of credit from foreign sources, Deputy Governor Abu Hena Mohd Razee Hassan told the seminar.
“These loans are cleared upon demands from exporters. There have been some cases of misusing it, which has totally stopped now,” he said.
According to the Bangladesh Bank official, a lot of countries have found themselves in a fix with loans for foreign commercial banks. “That’s not the case in Bangladesh, but we need to be cautious.”
The Bangladeshi private sector needs foreign borrowings, according to Barkat-e-Khuda, a senior professor of the BIBM.
“But it’s imperative to monitor that it’s used properly and the Bangladesh Bank has to make it sure,” said the former head of Economics of the Dhaka University.
BIBM Director General Toufic Ahmad Choudhury stressed developing the bond market.
“A market for government bonds is imperative. Planned measures can ease the liquidity crisis in the banking sector,” he said.