State-owned banks burdened with dues of government organisations

The state-owned banks of Bangladesh are bogged down under the loan burdens of government entities.

This burden is hampering credit flow to the private sector and thus hurting the investment scenario of the country, according to analysts.

Until December last year, 21 government organisations owed Tk 330 billion to four state-owned banks— Sonali, Janata, Agrani and Rupali, according to Bangladesh Economic Review 2015.

Bangladesh Petroleum Corporation (BPC), with a due of Tk 111.53 billion, is the largest defaulter.

After incurring losses for the last five fiscals, the state-owned oil entity is set to make profits in this fiscal, due to the slump in the global oil market.

But, still its outstanding loans to the banks are not cleared.

Finance Minister AMA Muhith said that the BPC had turned into a ‘junk’ organisation as it had to buy oil in higher price and sell it in a lower price.

“We did not adjust oil price despite a drop in the international market to clear the BPC’s backlog,” he told bdnews24.com.

BPC has started making profit from December last year, according to its chairman AM Badrudduja.

“But we are yet to recover from the previous losses. The BPC owes a huge amount in loans to the banks, which we might be able to clear now,” he told bdnews24.com.

The last time BPC saw profit was in FY 2008-09 during the military-installed caretaker government’s regime.

Since FY 2009-10 it has been counting losses. In the last fiscal (2013-14), the loss was Tk 23.21 billion.

It, however, recorded a Tk 34.54 billion profit in the first 10 months of the current fiscal (2014-15) thanks to plummeting oil prices.

A former Bangladesh Bank chief, however, suggests that the funds saved by not adjusting oil price in local market be used in other sectors.

According to Mohammed Farashuddin, Bangladesh will be able to save around Tk 3 billion in this fiscal due to the drop in international oil prices.

“The money can be used to import more capital machineries and intermediate goods to boost industrial sector, which will have a positive impact on the economy,” he said while speaking to bdnews24.com.

 The Bangladesh Power Development Board owes to banks in loans Tk 76.2 billion, Bangladesh Chemical Industries Corporation Tk 51.06 billion, Bangladesh Sugar and Food Industries Corporation Tk 32.15 billion, Bangladesh Agriculture Development Corporation Tk 23.12 billion, Bangladesh Jute Mills Corporation Tk 12.19 billion, Bangladesh Water Development Board Tk 9.39 billion, Bangladesh Oil, Gas and Minerals Corporation Tk 3.96 billion and Bangladesh Securities and Exchange Commission Tk 3.07 billion and Bangladesh Banijya (commerce) Corporation Tk 3.02 billion.

These huge outstanding amounts are hindering credit inflow from the state-owned banks to private sector.

“Since huge funds are stuck as loans to government entities the private sectors is being deprived from credit, creating an adverse impact on the investment scenario,” Zaid Bakht, research director of Bangladesh Institute of Development Studies (BIDS) told bdnews24.com.