Private lenders outperform others

Local private banks saw their credit growth accelerate in comparison to state and foreign banks due to the race for making more profit than others.

The credit growth of private banks, whose share in the total credit comes to 72.48 percent, accelerated 18.13 percent year-on-year on June 30 this year.

However, the state-owned commercial banks' credit grew by 8.48 percent during the same period, whose share in the total credit is 19.79 percent.

On the other hand, the foreign banks, whose share in the total credit, comes to 8.19 percent, accelerated 10.20 percent.

The sector's overall credit stood at Tk 642,173 crore, up 15.42 percent year-on-year.

The main reason behind the private banks' credit growth is marketing effort, said Nurul Amin, managing director of Meghna Bank.

“There is a pressure for profitability on the private banks, so they try to disburse more loans.”

The loans in the real sector did not grow much; rather they mostly went to trading sectors such as car loans, house building loans and SME loans, according to Amin.

“The banks lowered interest rates much in recent times. Not only that many offers are being made in the retail sector,” he said, adding that the demand for consumer loans is increasing as a result.

The managing director of a new private bank, on condition of anonymity, said the private banks' target is optimal use of creditable fund to earn maximum profit.

Another reason is that the service of private banks is better than the state banks and for that reason clients come to the private banks more, he said.

About one decade ago the market share of state banks was over 50 percent. But thanks to the private banks' aggressive banking and better service the market share of state banks is shrinking by the day.

A high official of a state bank pinned the cautious approach adopted by state banks in giving out fresh loans after a series of scams in recent times for the relatively lower credit growth.

The state bank officials said the branch managers do not become interested in giving loans though the higher management is willing.

Furthermore, the state banks have an upper limit on their loan growth after the watertight agreement signed with the Bangladesh Bank, he said.

He also blamed the lengthy decision-making process of state banks. Private banks can take quick decisions and go for aggressive lending, but the state banks do not have that liberty, he added.

Another cause for higher credit growth of private banks is that the new ones are expanding their networks.

As a result, their credit grew by 50 percent to 100 percent, said an official of a new private bank.