Credit growth falls for the fifth month

Private sector credit growth declined for the fifth month in a row in March thanks to the ongoing liquidity crunch brought about by the rising default loans.

In March, credit growth stood at 12.42 percent, which is much lower than the central bank’s target of 16.5 percent for the second half of 2018-19.

At the end of 2018, total non-performing loans amounted to Tk 93,911 crore, up from Tk 74,303 crore a year earlier, according to data from the central bank.

Scarcity of funds to give loans with, shortage of greenbacks to meet import payments and disbursement of large amounts of loans for the mega infrastructure projects are responsible for the dwindling credit growth, according to Bangladesh Bank officials.

Credit growth will decline further in the months to come if the existing unpleasant situation persists, they said.

Deposit growth is lower than the credit growth, forcing banks to adopt a cautious lending policy.

The net foreign asset in the country’s balance of payment is now negative, weakening the banks’ deposit base further.

At the same time, savers are gravitating towards savings certificates and bonds instead of bank deposits because of higher returns from the former, the BB officials said. 

The government should adjust the rate of interest on its tools for the sake of restoring stability in the financial sector, they added.