Banks’ consumer loans double in 2 years

Outstanding amount of banks’ consumer loans almost doubled in two years, surpassing Tk 50,000 crore as of March 31, 2016 as the country’s business sector has been going through a dull situation in recent years amid political uncertainty and delicate law and order situation.

According to the latest Bangladesh Bank data, the outstanding consumer loan figure increased to Tk 50,508 crore as of March 31, 2016 from Tk 46,008 crore as of March 31, 2015. The outstanding amount of consumer loans was Tk 27,512 crore as of March 31, 2014.

The outstanding amount of consumer loans increased by 83.58 per cent in last two years, the BB data showed.

A BB official told New Age on Sunday that banks in the period disbursed consumer loans two to three times more than their outstanding amount.
Banks usually set short-term repayment tenure against most types of consumer loans. So, the repayment trend in such types of loans is better than that of industrial loans.

Dhaka Bank managing director Syed Mahbubur Rahman told New Age on Sunday that the majority of the banks were now facing excess liquidity due to lower loan disbursement in the industrial sector amid dull business.

For this reason, the rates of interest on the maximum deposit products of the banks decreased to five per cent to six per cent in recent months.

The lower interest rates on the deposit products have also decreased the cost of fund of the banks that ultimately has put a positive impact on the consumer financing, he said.

Banks have recently cut the rates of interest on consumer loans that has encouraged their clients to take such loans, he said.

Banks are now giving importance to the consumer financing to earn quick profit amid dull investment situation, Mahbubur said.

Another BB official said banks turned their attention to disbursing more consumer loans in last two years as the businesspeople adopted a ‘wait and see’ approach to expansion of their industrial units amid dull business situation in the country.
Banks have recently set the rates of interest at 11-12 per on consumer loans for this year. The rates were 17-19 per cent in 2014.

Consumer loan disbursement by banks will maintain the upward trend in the coming months if the existing dull business situation in the country persists, the BB official said.

Consumers usually take the loans to purchase televisions, furniture, freezes, motorcycles and cars and to build houses.

Banks also disburse significant amount of consumer loans through issuing credit cards to their clients.

The BB data showed that banks disbursed Tk 9,146 crore to consumers for purchasing TV, freeze

and furniture as of March 31, 2016.
Consumer loan disbursement through credit cards stood at Tk 2,848 crore as of March this year. Banks’ clients took loans worth Tk 2,253 crore to purchase motorcycles and cars.

Banks also disbursed personal loans amounting to Tk 1,529 crore against the salary accounts of their clients.

Banks are now offering consumer loans at the range of between Tk 1 lakh and Tk 1.5 crore, the BB official said.

He said that commercial banks were now setting for their officials annul consumer-loan distribution targets.