Industrial credit flow declined by 4.64 per cent in the first quarter of the current fiscal against that of the same period of the previous fiscal, mainly due to political uncertainty.
Besides, the recovery of the credit dropped by 30.13 per cent during the same period, sources concerned said.
According to the central bank statistics, the disbursement of industrial term loans stood at Tk 21.10 billion during July-September period of the current fiscal. A total of Tk 22.12 billion was disbursed during the same period of the last fiscal.
During the same period, the industrial credit recovery was Tk 15.00 billion, recording a 30.13 per cent negative growth over the same period of the last fiscal. A total of Tk 21.48 billion was recovered during the same period of the last fiscal.
"Disbursement of industrial term loans dropped slightly during the period mainly due to political uncertainty," Managing Director of the Pubali Bank Limited and former Deputy Governor of the Bangladesh Bank (BB) Khondkar Ibrahim Khaled told the FE.
Under the prevailing situation, some investors were found to be hesitant to make investment in new industrial units, he added.
"Investors, particularly heavy weight investors, are maintaining 'go slow' policy so far as new investments are concerned," a senior official of a private commercial bank (PCB) said. Since the next year is an election year, the investors may not make their investment decisions hurriedly, he added.
The overdue and outstanding industrial term loans at the end of September 2005 stood at Tk 33.93 billion and Tk 237.54 billion respectively.
Overdue, as percentage of outstanding industrial term loans, however, have improved, decreasing from 26.31 per cent at the end of September 2004 to 14.29 at the end of September 2005.
Sources in the banking sector said sanction of large loans has already declined following the latest central bank move to tighten the policy relating to its single borrower exposure limit rules.
The BB has already re-fixed the limit on large loan of single borrower exposure by 15 per cent to improve risk management in the banking sector.
The single borrower exposure limit on large loan has already been reduced from 50 per cent to 35 per cent that include 15 per cent funding facilities.
Most of the banks are now busy to comply with the single borrower exposure limit rules instead of sanctioning new large loans, the sources added.
Under the existing timeframe, the limit has to be brought down to 35 per cent from 50 per cent within December 2005 for continuous loans like overdraft. December 2006 has been fixed as deadline for term loans like project loans.
However, the exposure limit for the customers having both continuous and term loans has to be brought down within December 2006, the BB said in a recent circular.