The New Nation - Internet Edition

Staff Reporter

Though the low-and middle-income groups of people living in urban areas have shown tremendous interest in an easiest-ever housing loan scheme offered by Bangladesh Bank recently, the country's commercial banks and financial institutions have not been showing any positive response to the central bank's initiative.

Bangladesh Bank introduced the scheme, titled 'Refinancing Scheme in Housing Sector' through a circular on July 18 last under which a person with a monthly income of less than Tk 30,000 will be eligible to receive a maximum loan of Tk 15 lakh from commercial banks and financial institutions to buy or construct an apartment of highest floor area of 1,250 square feet The loan will be repayable in quarterly instalments over a period of 20 years with one-year grace period at the beginning.

The total amount of the three-year project is Tk 300 crore. The central bank will provide Tk 100 crore each year during the next three years to the eligible commercial banks and financial institutions for the home loan scheme.

The interest rate for the housing scheme will be the lowest-ever in the country. Now, the interest rates of home loan schemes offered by commercial banks and financial institutions range between 14 per cent and 18 per cent

The BB will give the money to commercial banks and financial institutions for disbursing as loans under the scheme.

As per the circular, the borrower can utilise the money for buying or constructing apartments in Dhaka, Rajshahi, Sylhet, Chitagong, Khulna and Barisal City Corporation and Savar, Tongi, Gazipur and Narayanganj municipal areas.

But the borrower will not be entitled to receive the loan if he/she already possesses a house or a flat in his/her name or in the name of spouse or children. Also those who have already taken housing loans from any bank or financial institution will not be able to avail of this opportunity under the scheme.

Besides, people working with companies, which have housing loan scheme for their employees, will not get the loan.

BB will give 75 per cent of the loan and rest 25 per cent will have to be given by the banks concerned, the circular said.

The BB will give the money to the commercial banks and financial institutions at 5 per cent rate of interest, while the borrower will have to pay the installments at 10 per cent rate of interest The borrower will not have to pay any other fee or he will not be charged any amount other than 10 per cent interest

The circular said only the banks or financial institutions whose volume of classified loan is less than 10 per cent of the total outstanding loans will get the central bank money for disbursement

The loan providers as per their own rules and regulations will handle all activities, including selecting eligible customer, documentations, debt-equity ratios and recovery monitoring.

The scheme is especially designed for low and middle-income people who have very limited scope to get loans from existing schemes.

"We have estimated that the monthly installment against the loan will be not more than of a service holder's monthly house rent allowance," the source said.

According to the central bank's conditions, the state-owned banks are not eligible to receive this loan as they have already disbursed more than 10 per cent of their total loan as housing loan.

On the other hand, the private commercial banks and the foreign commercial banks which are eligible to receive this loan from the Bangladesh Bank, have not been showing any interest to this offer. Though the Bangladesh Bank issued a circular in this regard over a month ago, only four financial institutions have so far applied for the loan.

Sources said two conditions mentioned in the circular have kept the state-owned banks and other financing institutions away to avail of this scheme.

One of the conditions says that the financial institutions, including the state-owned commercial banks which have already provided 10 per cent of their total loan in housing sector, will not come under the scheme.

On the other hand, the financial institutions whose defaulted amount of loan is less than 10 per cent of total classified loan will get the opportunity under the scheme. Since the state-owned banks and other financial institutions which have already provided more than 10 per cent of their total loan in housing sector and their defaulted amount of loan is also higher, they have been kept out of this scheme.

Under the conditions, all the foreign banks operating in Bangladesh have got the opportunity to come under this scheme. But the foreign banks have no interest about this scheme since they provide loans comparatively at higher rates of interest

On the other hand, major private commercial banks which are able to fulfil the conditions of the Bangladesh Bank have not been showing any interest to this scheme. Since the issuance of the circular by the central bank on July 18 last only four financial institutions have so far applied to the Bangladesh Bank seeking the loan/fund. The applicants are Trust Bank, Islami Bank Bangladesh Limited, IDLC and National Housing Ltd. Of these four institutions, only one bank and one housing financing institution are eligible to get loan, a senior official of the department concerned of Bangladesh Bank told The New Nation.

Sources concerned said under the scheme Bangladesh Bank would provide Tk 300 crore in three years to the interested commercial banks and financial institutions at five per cent rate of interest It was mentioned in the circular that the interested banks and financial institutions would be able to realise loan at 10 per cent rate of interest from borrowers.

Recently, a change has been made to this rate of interest Instead of specifying the rate of interest, the central bank in a circular said the borrowing banks and other financial institutions would realise five per cent interest in addition to the Bangladesh Bank's interest

Besides, the Bangladesh Bank in its circular issued on July 19 did not mention whether the interest would be simple or complex although it mentioned about the interest to be charged. In the amended rule, it has been simple interest The central bank will soon inform the commercial banks and other financial institutions about this change.

A senior official of the Bangladesh Bank told The New Nation that the circular was issued within a very short period of time under the pressure of the government As a result, there were some ambiguities in the circular.

Besides, the official opined that no scheme could be introduced by fixing the rate of interest in such a manner, because changes the rate of interest of Bangladesh Bank might take place at any time. The loan disbursing banks and financial institutions will have no other way but to realise interest at the rate of 10 per cent Taking all these things into account, the Bangladesh Bank is going to bring some changes in its circular soon.