Private credit growth drops
Private sector credit growth dropped 1.12 percentage points in June from a year earlier due to cautious lending and slow export and remittance growth.
In June, private sector credit grew 15.66 percent, which is less than the target of 16.5 percent set in the monetary policy for the second half of fiscal 2016-17.
One of the reasons for the slow growth could be the banks' cautious attitude towards sanctioning loans, said Helal Ahmed Chowdhury, a supernumerary professor of the Bangladesh Institute of Bank Management.
“Due to the way you write in the media about default loans, the bankers go for much scrutiny before granting loans.”
Chowdhury, also a director of Islami Bank, said many loans have been sanctioned and the borrowers have opened letters of credit for those. But the LCs have not yet matured. “When the goods will arrive, the amount of credit will increase,” he added.
Nurul Amin, managing director of Meghna Bank, said the growth has slowed down somewhat but in absolute terms the amount of loans has increased much.
Private sector credit increased Tk 105,049 crore in the 12 months to June and stood at Tk 776,058 crore, according to Bangladesh Bank statistics.
Amin said a reason for the slow credit growth could be the decline in remittance and sluggish export growth.
Last fiscal year, remittance dropped almost 15 percent.
“Nowadays you often hear the businessmen say that the trade and commerce are dull. This is reflected in the low demand.”
Since the export growth is slow, exporters are taking fewer loans. In fiscal 2016-17, exports grew only 1.69 percent.
Although the private sector credit growth was lacklustre, the GDP grew 7.24 percent last fiscal year, according to the Bangladesh Bureau of Statistics' provisional data.
This prompted the central bank to set a private sector credit growth target at 16.2 percent in the first half of the current fiscal year, down from the preceding six months' 16.5 percent.
For achieving fiscal 2017-18's budgetary growth target of 7.4 percent, a 16.2 percent private sector credit growth target is enough, said BB Governor Fazle Kabir last month while releasing the Monetary Policy Statement.
Alongside the private sector credit, the government's credit from the banking sector also fell drastically.
In fiscal 2016-17, the government's borrowing from the banking system slumped 14.78 percent, or by Tk 16,885 crore, compared to the previous year.
In the revised budget for last fiscal year, the government's target for borrowing from the banking system was Tk 23,903 crore.
Since the government's borrowing from savings instruments increased, there was no need to borrow from banks, said a BB official.
The net borrowing from savings instruments stood at Tk 52,417 crore last fiscal year, up 82.43 percent year-on-year.
In fiscal 2016-17's revised budget, the government's borrowing target from the savings instruments was Tk 45,000 crore.
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