Stimulus loans: BB directs banks to prioritize serving more severely affected businesses and more of them

Banks have been instructed to disburse stimulus loans to businesses which are affected more gravely by the Covid-19 pandemic but have not yet received low-cost financing incentive packages.
 
In a circular on Wednesday, the Bangladesh Bank asked banks to bring a greater number of affected businesses within the fold of stimulus packages instead of concentrating the financing on a small number of beneficiaries. 

The stimulus packages, announced by the government to revive the pandemic-hit economy, have reached around 1.24 crore beneficiaries as of May this year, said a recent survey report of the Bangladesh Bank.  
Only 3,245 large firms have enjoyed 39% of the total disbursed stimulus loans while around one lakh small businesses have received 17% as of May, reflecting how unequally financial packages have been implemented, according to the latest report of the central bank.

In Wednesday's circular, the central bank asked the managing directors and chief executive officers (CEOs) of all banks to issue loans to eligible borrowers and instructed the lenders to prioritise large industries and service sector business entities in the stimulus package, who didn't get loan packages before. 
The Bangladesh Bank directed banks to decentralise the loans of the stimulus packages for fiscal 2021-22 and asked the lenders to include a bigger number of business entities in the stimulus packages.

The central bank also said that due to the Covid-19 pandemic, vulnerable business entities in large industries and the service sector should be given preference in availing these loans.  

On 25 June last year, the Bangladesh Bank instructed banks and non-bank financial institutions to include more large industries and service sector business entities in the disbursement of stimulus packages where they can receive loans for three years from the stimulus package of Tk30,000 crore if they did not avail in a year, the total amount they are  eligible for.

In that circular, the Bangladesh Bank allowed banks and non-bank financial institutions to issue loans to eligible borrowers in phases in three years. 

Previously, a business entity was entitled to a low-cost loan for just one year. 
Following the outbreak of the novel coronavirus, the government announced a number of stimulus packages worth Tk34,000 crore for the industries and services sectors, including the recent one-year stimulus of 1,000 crore for coronavirus-hit hotels, motels, and theme parks, in the tourism sector. 

For various different packages, the government will pay half of the applicable interest and borrowers will have to pay the remaining half.

The Bangladesh Bank also clarified that the interest subsidy will only be given on loans that are within the specified limit.