Credit roll-out by local private banks has increased substantially in recent times on the back of a pick-up in business activities thanks to political calm.
Credit growth of the private banks, whose share in the total credit disbursed comes to 69.35 percent, stood at 15.56 percent on June 30, compared to a year earlier.
The state-owned and foreign banks that account for 23.82 percent of total loans have seen negative credit growth in the year to June 30, according to data from the central bank.
Credit disbursement by the state-owned commercial banks declined 4.17 percent and foreign banks 1.67 percent, while the five state-owned specialised banks registered 13.12 percent growth on June 30 from a year ago.
At the end of June, total credit stood at Tk 491,210 crore, with almost half of it being industrial credit that comprises working capital and term-loans.
Working capital in both private and foreign banks rose significantly, statistics from Bangladesh Bank show.
In fiscal 2013-14, working capital disbursement by private banks rose around 20 percent year-on-year and that of foreign banks 95 percent. But state-owned commercial banks' working capital disbursement fell 56 percent.
Term loan disbursement by private commercial banks rose 30 percent, while that of state-owned commercial banks and foreign banks 56 percent and 26 percent respectively.
Khondker Ibrahim Khaled, a former deputy governor of the central bank, said the private banks' credit growth is nothing out-of-the-ordinary as the political situation has calmed down. “In fact, a vacuum does not exist for long.”
New investment though is slightly low for non-availability of gas and electricity connections to new industries, he said.
The new factories are being run with fuel-based generators, which increase operational costs. If two factories from the same industry are run with two different sources of energy, they cannot compete with one other, according to Khaled. “As a result, the new industries are hesitant to come to the market.”
He also said the fall in credit disbursement by state banks is due to their shyness to distribute loan owing to earlier scams.
Zaid Bakht, a director of Sonali Bank, echoed the same, adding that state-banks' vigilance is high mainly after the Hall-Mark scam.
He said the reason for the private banks' increase in credit disbursement is that they mainly provide import financing and working capital and imports increased recently and so did businesses' demand for working capital following the diffusion of political tension.
Bakht, also the research director of Bangladesh Institute of Development Studies, expects credit roll-out to increase much next year, when the Padma bridge project is in full swing.
Meanwhile, a branch manager of the state-owned Agrani Bank told The Daily Star that while they hesitate to extend a Tk 100 crore loan even after adequate collateral, the private banks give out Tk 200 crore loans against the same collateral.
“Banking by private banks is much more aggressive than the state banks,” he added.
A branch manager of UCBL Bank, a private bank, said they are given a specific target every year and if they fail to meet that the bank cannot do business. “We still scrutinise all paperwork before disbursing loans.”