Banks will see good business in 2022

The banking sector will see good business opportunities in the New Year as both external and internal factors reflect full scale resumption of economic activities. However, the only uncertainty is how borrowers will behave in phasing out from the loan moratorium facility. 

The banking sector has already started to phase out the relaxed policy offered during pandemic.

However, there is ample liquidity in the market which is a good sign and it may be supportive in the future. Bangladesh Bank also says they will be supportive as monetary policy will be relaxed. 

We are seeing a good comeback in the market. External economic activities, that is export and import, will increase, which will open other investment opportunities.

Exports will increase further, along with the demand for manpower. Bangladesh is making new agreements with different countries, which is a good sign. In addition, our capital machinery imports are increasing. FDI (Foreign Direct Investment) is also likely to increase.

Foreign investors will be more convinced now than ever to come to Bangladesh considering our indicators as we have shown good resilience in economic performance in the last two years. It will boost our economy further.

The government policy towards the FDI is also in a positive tone. The economic zones are being activated. Overall, the investment environment seems to be positive and I believe it will continue in the future.

If investment increases, it will also make a positive impact on other issues including employment. Infrastructural projects like Metro Rail and Padma Bridge will add new value in the economy when completed.

These factors will have a positive impact on the lending of banks, and credit growth will increase if there is ample liquidity, which is already observable.

In this situation, we can easily expect that our GDP will move forward in a positive direction. However, unrealised income and loans will create an extra pressure on the balance sheet of some banks. Customers who are currently under economic stress can be encouraged to take advantage of the situation. 

Loan default is more of a cultural problem in our country than an economic one. The behaviour pattern of the defaulters, however, has never been studied. However, despite all these, I think 2022 will be a good year for the banks.

The impact of the Omicron variant of Covid-19 in Europe and the USA is also a factor here as it will affect our export. We have to observe the situation closely.

Keeping the remittance flow in the country will be a challenge although migrant workers are going abroad. We have already seen a discontinuity in this regard during the pandemic.

The government is providing incentives for remittance. However, we have to ensure the remittance flow through the legal channel to prevent the alternative ones used by the migrant workers due to the difference in exchange rate of the dollar.

The forex market will feel pressure due to the rise in import trade and commodity prices. The good news is that some cooling effects are coming. There is a possibility of monetary tightening as the global market is observing some sort of inflation. However, we have not yet felt the impact of inflation that much.

In the last two months, the prices of food and capital machineries have increased in the international market, which will affect the local market.

The support that the central bank has been providing the banks in the last two years should be continued, especially, the liquidity support.

There has been some crisis in some sectors, including the hospitality and entertainment sectors. These sectors need a little concession. In general, the most affected sectors should be brought under subsidy by the government.

Md Arfan Ali is the Managing Director of Bank Asia