Karmasangsthan Bank seeks five-year extension of state guarantee for Tk 7.0b loan

Karmasangsthan Bank has urged the government to extend the tenure of the state guarantee for a Tk 7.0 billion loan taken from Bangladesh Bank (BB) by five more years, in a bid to continue supporting youths through its loan programme, sources said.

The bank has recently sent a letter to the Financial Institutions Division (FID), seeking necessary steps to renew the loan facility, which was originally backed by a government guarantee issued by the Ministry of Finance. The existing five-year guarantee is set to expire on December 5.

Bangladesh Bank provided Tk 7.0 billion loan facility to Karmasangsthan Bank for disbursement under the 'Youth Loan Programme'.

The loan programme was aimed at promoting self-employment among the unemployed youth, alleviating poverty, generating employment, and enhancing income by engaging young people in productive economic activities.

The original agreement between Bangladesh Bank and Karmasangsthan Bank was signed on January 7, 2021, with the government guarantee in place.

Karmasangsthan Bank has distributed loans among 48,752 borrowers, benefiting an estimated 175,995 individuals. The bank reports an 84 per cent recovery rate on the distributed funds.

Against the Tk 7.0 billion principal, Karmasangsthan Bank has already paid Tk 994.2 million in interest to the central bank, with no outstanding interest currently due.

However, the entire loan amount, including interest -- totalling approximately Tk 7.28 billion -- must be repaid by December 5, 2025, when the term concludes.

If this money is paid, the bank's lending activities will be curtailed and the benefits that the youth have been getting by taking loans in this sector will be disrupted, the Karmasangsthan Bank said in its letter to the FID.

An official at the FID said, "We're working on the issue and will make a decision to this end shortly."

rezamumu@gmai.com