1Warning Signs: Bangladesh Chamber of Industries Sounds Alarm on Banking and Investment Landscape

  • BCI warns of liquidity crisis & investment stagnation.
  • Banks prioritize bonds over industries, drying up investments.
  • Government bonds dominate investments, hindering industrial growth.
  • Challenges: low sales, inflation, gas shortages, high loan rates.
  • Critique: electricity/gas price hikes, NBR policies impede businesses.

BCI Sounds Alarm :

The Bangladesh Chamber of Industries (BCI) warns of a coming liquidity crisis in banks and a drying up of fresh investment owing to current central bank policies.

Bonds Over Industry :

Anwar-ul Alam Chowdhury Parvez, President of BCI, expresses concern that banks, incentivized by Bangladesh Bank regulations, prioritise bond investments over supporting sectors, resulting in liquidity pressures.

Strict Investment Climate :

Anwar emphasises that current policies discourage new investments, thereby aggravating unemployment and slowing economic growth.

Government Bond Dominance :

Government treasury bonds, seen as safer assets, attract banks with cut-off rates ranging from 11.80% to 12.10%, resulting in less investment in sectors.

Sectoral struggles :

BCI highlights the industrial sector’s concerns, including operating constraints, declining sales, inflation, excessive loan interest rates, and energy supply issues.

Policy Critique :

Anwar criticises recent power and gas price increases, blaming them on market swings rather than genuine supply difficulties, which exacerbates industrial operations.

Regulatory hurdles :

Anwar-ul Alam criticises National Board of Revenue (NBR) regulations, claiming that they create operational issues for firms and stifle long-term growth.

In a meeting with Industries Minister Nurul Majid Mahmud Humayun, BCI President Anwar-ul Alam Chowdhury Parvez voiced profound worry about the negative impact of current central bank policies on the country’s financial landscape. He emphasised the Bangladesh Bank’s directives, which encourage banks to invest in government treasury bonds. As a result, this tendency threatens to trigger a liquidity crisis within banks, thereby stifling new investments and worsening unemployment rates.

Anwar-ul Alam emphasised the importance of protecting existing industries in light of the current economic issues. He noted that the industrial sector is far below its potential, hampered by a slew of challenges such as inflation, petrol shortages, exorbitant loan interest rates, and an overall hostile business environment.

The dominance of government bonds in bank investment portfolios is an increasing worry, with cut-off rates ranging from 11.80% to 12.10%, according to Bangladesh Bank data. This unbalanced investment preference reduces potential capital infusion into industries, inhibiting growth and innovation.

Furthermore, Anwar criticised recent increases in power and petrol costs, claiming that they were unreasonable given the current decline in worldwide fuel prices. He expressed concern that such steps would exacerbate the problems faced by industries already dealing with operational inefficiencies.

Anwar-ul Alam also targeted the National Board of Revenue (NBR), claiming its regulations as a barrier to corporate management. He contended that regulatory complications compound operational challenges, limiting the sector’s ability to thrive in a competitive global environment.

In conclusion

BCI’s concerns about the negative impact of central bank policies on the banking sector and industrial environment highlight the critical need for policy reform. Bangladesh faces stagnation and an economic slump unless decisive action is taken to solve liquidity difficulties and encourage industry investment.

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