ABB for implementing new rule in phases

The Association of Bankers, Bangladesh (ABB) has requested the finance ministry to implement the new mandatory condition of submitting tax returns to get credit cards and loans in phases over several years. 

It sent a letter to the finance minister on Monday, arguing the condition would negatively impact the banking sector; the cottage, micro, small and medium enterprise (CMSME) sector; and individual and retail clients.

Besides, it urged him to allow CMSMEs to borrow Tk 50 lakh and individuals Tk 10 lakh without submitting tax returns. For credit cards, it requested to set the limit at Tk 5 lakh.

The ABB also sent copies of the letter to the Bangladesh Bank governor, the revenue board chairman, the finance secretary, and the Financial Institutions Division secretary on the same day.

Selim RF Hussain, chairman of the association and BRAC Bank managing director, said in the letter CMSME entrepreneurs were already dissatisfied with the lengthy loan disbursement process and the requirement to submit various documents to get loans.

He said the new requirement would increase their hassles. 

“This will have a negative impact on the progress of the economy as CMSME entrepreneurs will be discouraged to go to banks. Instead, they will go to informal lenders,” he said in the letter.

He also said banks have no system to verify tax returns.

A huge number of people would fail to avail credit cards if the new requirement took effect as banks issue credit cards for those with a minimum monthly income of Tk 20,000, the letter said.

For the upcoming fiscal year, the government has made it compulsory to submit a copy of an individual’s tax return to enjoy 38 types of services, including applying for a credit card, enrolling children in an English medium school, and obtaining a trade licence.

Submitting returns has also been made mandatory for applying to a bank or non-bank financial institution for loans of over Tk 5 lakh.

At present, only the tax identification number is mandatory to apply for a credit card.

The Bangladesh Bank data shows banks issued 37,98,207 credit cards to clients at the end of March this year, up from 28,73,498 at the same time last year.

Syed Mohammad Kamal, country manager of MasterCard Bangladesh, recently told The Business Post the credit card issuance rate would fall in the coming days because of the new rule.

“The decision has been made at a time when we are talking about Digital Bangladesh and emphasising digital payments,” he said. No other country in the world had made it mandatory to submit tax returns to get credit cards, he added.

The central bank data shows credit card transactions stood at Tk 2,513 crore till March this year, which was 19.15 per cent higher than the previous month and up 40.94 per cent year-on-year.