Nothing for banking sector in FY25 budget

The proposed national budget of Tk 7,97,000 crore for FY2024-25 has brought forth no concrete measures to reform and develop the country’s banking sector, at a time when this sector is reeling from non-performing loans (NPL) along with a plethora of issues.

NPLs in Bangladesh have hit a historic high of Tk 1,82,295 crore at the end of the first quarter (January-March) of 2024, occupying 11.10 per cent of the banking sector’s outstanding loans of Tk 16,40,855 crore.

The figure indicates that NPLs have increased Tk 36,662 crore at the end of the March quarter — from Tk 1,45,633 crore recorded at the end of the December quarter in 2023 — occupying 9 per cent of the banking sector’s outstanding loans of Tk 16,17,689 crore.

On the other hand, 10 banks were also suffering from capital shortfall of Tk 39,655 crore at the end of December 2023.

These banks are state-owned Janata, Agrani, Rupali, BASIC, Bangladesh Krishi and Rajshahi Krishi Unnayan Bank, along with private Bangladesh Commerce, ICB, National and Padma.

Even on Friday, Finance Minister Abul Hassan Mahmood Ali at a post-budget press conference said that borrowing from banks is a standard procedure and it has been done by all the finance ministers in all the budgets.

“All the countries even the developed ones borrow more from the banks. So, there is nothing to worry about,” he said.

According to the proposed budget, the government again plans a heavy reliance on borrowing from the banking sector in FY25 to cover the deficit. This target is Tk 1,37,500 crore, which is 2.5 per cent of the GDP.

Such borrowing was Tk 1,32,395 crore in FY2023-24. However, at the end of the ongoing FY, the amount will rise to Tk 1,55,935 crore, which is mentioned in the revised budget of FY24.

For FY25, the proposed total budget deficit is Tk 2,56,000 crore, which is 4.6 per cent of the GDP. To finance this deficit, the government plans to borrow Tk 95,100 crore, including grants, from foreign sources, while Tk 1,60,900 crore will be borrowed from domestic sources.

Ahsan H Mansur, the executive director of the Policy Research Institute of Bangladesh, told The Business Post that the government should have outlined banking sector reforms in the budget. It should have mentioned how the banking sector would provide the government with this huge amount of money.

The private sector, which contributes to the whole economy, will not be able to get loans from banks if the government borrows this money from them, he added.

Ahsan said that the budget also did not say anything regarding the weak banks. However, the government is supporting these banks that are creating problems in the financial sector at a time when the merger and acquisition plan of banks has failed.