Defaulted loans big problems for country’s banks: BB Governor

Bangladesh Bank (BB) Governor Abdur Rouf Talukder said that the defaulted loans are the big problems for the country’s banks. The main reason for this is that banks take short time deposits and make long term investments. Because of this, defaulted loans are increasing.

BB Governor said this while addressing as the chief guest at the opening ceremony of World Investor Week at Agargaon Bangladesh Securities and Exchange Commission (BSEC) in the capital on Monday (October 3). 

Sheikh Mohammad Salim Ullah, Secretary of the Financial Institutions Department of the Ministry of Finance was the special guest on the occasion.

The governor said, if money is taken from banks, money has to be paid every quarter. If you do not pay twice in a row, you will become a defaulter. And if you take money from the capital market, you have to pay dividends once a year.

He said, entrepreneurs in neighboring countries do long-term financing from the capital market. And short term financing, working capital, trade finance is taken from banks. But it has not yet developed in our country.

He also said, “I saw after joining as governor; When one bank issues bond, another bank invests in its entirely. Because this investment is 100% safe. Later we stipulated that 50 percent should be sold outside. It also allows common investors to invest in bonds.”

The governor said, if we can improve the bond market, our entrepreneurs will come to the capital market. Entrepreneurs will take money from this market for long term. Then there will be no defaulted loans.

The Ministry of Finance, Bangladesh Bank and Bangladesh Securities and Exchange Commission are working to develop the bond market. For this purpose, we have prepared treasury bonds for trading. We expect trading in the treasury closed capital market from next week.

Referring to investment in savings bonds, he said, we saw savings bonds worth Tk 41,000 to 42,000 crore were sold. Out of this, one person was seen investing Tk 150 crore or more in savings bonds. A section of people are enjoying the benefits of savings cards but common people are taking less advantage of it. Then we start the automation system in savings bank. After that a person can buy a savings certificate of up to Tk 50 lakh from a bank. Later we advise the government to reduce the interest rate. But the government has not reduced the interest rate on savings certificates up to 15 lakhs for the sake of common people. If you invest more than that, the rule has been made to gradually reduce the interest rate. This has reduced investment in savings bonds.”

Now instead of investing in savings bonds, the governor suggested investing in the capital market.