Although bank loan disbursement to the industrial sector at the end of the third quarter of this year was lower than that in the same period last year due to the coronavirus pandemic, the situation is getting better.

Industrial loan disbursement at the end of the third quarter of this year (July-September) was about 13% lower than that during the same period in 2019.

At the end of September last year, Tk108,849 crore was disbursed. It decreased to Tk94,850 crore this year.

But the situation began to improve as industrial loan disbursement in the third quarter of this year increased by 28% compared to the second quarter (April-June).

Bankers say this is the evidence that industrial production is recovering after coping with the Covid-19 blows.

Compared to the second quarter, loan disbursement at the end of the third quarter increased the most in small industries. Large and medium industries are in the second and third place respectively.

During this period, the disbursement of term and working capital loans increased equally by about 28%.

The Bangladesh Bank statistics released on Tuesday revealed that compared to the same period last year, both disbursement of loans and debt collection decreased at the end of the third quarter of this year. Although the amount of expired loans increased during this time, that of default loans decreased.

Due to the suspension of loan classification till December, many expired loans were not classified. According to bankers, if classification restarts in January, the amount of default loans will start increasing.

Syed Mahbubur Rahman, former president of the Association of Bankers Bangladesh and managing director of Mutual Trust Bank, told  loan disbursement to the industrial sector had declined this year due to the pandemic.

He said financial assistance being given to the industries from the incentive package was being used mainly as working capital.

“Salary is being paid with that money. One of the reasons why banks have excess liquidity is the low disbursement of industrial loans.”

Former president of Dhaka Chamber of Commerce and Industry Abul Kasem Khan echoed Mahbubur.

He said incentive packages had helped industries survive, but traders were taking cautious steps regarding new investments as the demand side was slow.

Along with domestic demand, global demand (exports) was also declining, Kasem said.

He urged the government to focus on increasing domestic demand.

Term loan is considered a criterion for expansion of industries and new investments. Entrepreneurs usually use this loan to set up new factories or expand the existing ones. This increases productivity and boosts employment.

Compared to the same period last year, term loans decreased the most, by about 30%, at the end of the third quarter of this year. Term loans declined the most, by more than 34%, in large industries.

The amount of term loans disbursed to large industries at the end of September was Tk11,786 crore.

Dr Ahsan H Mansur, executive director of the Policy Research Institute, said many ongoing investments had hit a snag because of the pandemic.

He said no one was making fresh investments as the future remained uncertain.

During the said period, the disbursement of term loans to small industries decreased by more than 19%.

However, the rate of decline in medium industries was much lower, about 3.5%.