Covid-19 stimulus package: Govt starts payment of interest subsidy to banks

The government has started disbursing interest subsidy to the state-run and private banks that have distributed working capitals from stimulus package among the big industries in a bid to absorb the shock of Covid-19.

Finance division under the Ministry of Finance disbursed Tk 1,84,54025 in subsidy as the working capital interest rate for April, May and June earmarked for eight state-owned and private banks. 

General Manager of Bangladesh Bank Mohammad Forkan Hossain sent a letter regarding payment of the interest subsidy of loan.

These eight banks are - State-owned Sonali and Agrani, Prime Bank, IFIC Bank, Mercantile Bank, Eastern Bank, Exim Bank and Trust Bank. 

An official of the Finance Division on condition of anonymity said the total interest loan subsidy will be raised from Tk 3,000 crore but it will be increased because of raising total incentives package from Tk 1,03,000 crore package to Tk 1,06,000 crore.

Meanwhile, the allocation for working capital incentives package was raised to Tk 33,000 crore from Tk 30,000 crore to this end.

The official said the Bangladesh Bank is now providing Tk 85,000 crore in loan to businesses which are affected by the coronavirus. 

An additional Tk 7,500 crore from working capital loan package is being disbursed for payment of salaries and allowances of the export-oriented industries, the official said. 

According to working capital package under incentive package, borrowers are paying 4.50 per cent interest rate to avail the fund while banks will get 9 per cent interest as the government will give the rest as subsidy. 

Banks have been permitted to take up 50 per cent fund from the Bangladesh Bank's refinance scheme to provide the credit to the export-oriented industries smoothly. Borrowers will have to pay the loans within two years including a grace period of six months.

Former finance advisor to past caretaker government Dr AB Mirza Azizul Islam has said the banks have to practise caution in providing loans to the selective people who are capable to return the loans to their respective banks.

The government has given guarantee to those loans; the government would pay the money back to the loan-issuing bank if the loaners default, he also said.

Mirza said, “If the clients of the bank default, the interest of the loan will increase as a result.”

ask/wi