– Banking sector faces severe liquidity crisis
– Govt borrowed Tk 1,262 in 3 days (Jan 01-03)
Lenin Rahman: The banking sector may be in trouble if government continues its borrowing spree to minimize the upcoming budget deficit for the ongoing fiscal year, experts said.
Industry insiders opined excessive government borrowing increased significantly in first half (July to December) due to shortfall in the revenue collection as well as to minimize government expenditure ahead of national election.
The government borrowing from the banking sector stood at Tk 93,367 crore as on January 03. The last bank transactions counted on December 27 in the last year and reopened on January 01 this year mainly for national election. At the end of the last fiscal year 2017-18, the amount was Tk 88,258 crore which means that the government borrowed Tk 1,262 only in three days (January 01-03).
However, the government borrowing stood at Tk 68,755 from the commercial banks in the first six months of the current fiscal while the target of ongoing fiscal is Tk 42,029 crore. The borrowing in the first six months exceeded from the target of the fiscal year or Tk 26,726 crore, according to the latest data of Bangladesh Bank.
Sources said, the government borrowed over Tk 5,000 crore only in December last to meet the election expenditure.
On the other hand, the pace of revenue collection may appear a big challenge for the new government in coming months in meeting the need of development expenditure as shortfall in collection by National Board of Revenue (NBR) continues.
In the first six months NBR lagged behind Tk 29,000 crore in collecting of revenue which forced government to lend excessively from the internal resources. Sources said the government might have to cut revenue collection target to a significant extent, which would also put pressure on implementation of the annual development programme (ADP). The revenue collection deficit was much larger than that of the target while the growth rate was also very slow, which would be a great challenge for the government, experts said adding the government would be able to balance the situation as the rate of ADP implementation would also remain slower like previous years.
The government might also increase its borrowing from banking sector to meet the deficit in revenue collection which will put additional pressure on already slowed down private sector credit growth, he added.
Experts pointed out that one of the reasons behind the widening shortfall in revenue collection might be that NBR might have relaxed exercising its authority for revenue mobilisation ahead of election.
They suggested revising existing tax structure and tax concession system, and dedicated efforts for expansion of tax net to increase revenue collection.
A senior official of Bangladesh Bank said almost banks are facing liquidity crisis for raising NPL. Now, the provision shortfall is another problem for banks to disburse fresh loans.
The banks are failing to achieve the credit disbursement target to the private sector due to liquidity crisis, provision shortfall and excessive borrowing from the banking sector, economists blamed.
In this circumstances, the banking sector are being failed to provide easy bank loan for the private sector. According to a Daily Industry report on January 02, some 29 banks out of 57, have failed to offer loan at single-digit interest in November last year due to multifarious reasons including the rise of operating cost and NPL, provision shortfall and liquidity crisis.
Talking to the Daily Industry recently, Syed Hasnat Habib, Managing Director of NRB Global Bank Limited told that a sound financial sector is essential to make the economy vibrant.
Recently, the Finance Minister asked the authorities concerned to undertake rigid steps to minimize NPL which would ensure a sound banking sector for higher economic growth of the country. “I expect the government will take a rational decision to borrow from the banking sector as the sector is passing a crucial moment”, Hasnat added.