Pvt sector credit growth rises to 16.56pc in FY16 on SCB lending

The private sector credit growth in the country stood at 16.56 per cent in the recently concluded fiscal year 2015-16, which was the highest in four years, as the loan disbursement by state-owned commercial banks increased abnormally during the period.
Credit flow to the private sector stood at Tk 6,69,740 crore in FY16 against Tk 5,74,599 crore in FY15.
According to the Bangladesh Bank data, the private sector credit had registered 13.19 per cent growth in FY14, 12.27 per cent in FY13 and 10.85 per cent in FY12.
The private sector credit growth maintained an upward trend between August and June in a row in the last fiscal year.
A BB official told New Age on Thursday that the country’s private sector credit growth in FY16 increased significantly as the SCBs disbursed loans aggressively.
The BB data showed that the year-on-year private sector credit growth in the SCBs, which are struggling with defaulted loans, increased to 16 per cent in May from 6.4 per cent in July of FY16.
An increased trend in defaulted loans of the five SCBs — Sonali, Janata, Agrani, Rupali and BASIC – in recent months also played a role in increasing their private sector credit growth, the BB official said.
The credit growth of the five banks would have decreased if they were able to recover their non-performing loans.
Banks attach their classified loans with their outstanding loans.
Credit flow of the SCBs to the private sector stood at Tk 1,27,172.90 crore in May 2016 against Tk 1,11,256.80 crore in July of 2015, the BB data showed.
Against the backdrop, the central bank is now conducting a study on the SCBs to detect why their credit growth sharply rose in the first 11 months of FY16, a BB official said.
The year-on-year private sector credit growth, however, slightly increased in the PCBs during the first 11 months of FY16 as it registered a growth of 17.9 per cent in May from 17.7 per cent in April.
The SCBs have recently cut their interest rates on lending that might encourage the businesspeople to get loans from the banks, the official said.
He said that the BB had recently restructured and rescheduled a significant amount of large loans of different banks.
The central bank facilitated the SCBs more to restructure and reschedule their defaulted loans than the PCBs.
The habitual defaulters enjoyed the restructuring and rescheduling facility and they (defaulters) might take fresh loans from the state-owned banks, the official said.
Besides, big borrowers have shifted their banking from the PCBs to the SCBs due to the lower rates of interest being offered by the SCBs, he said.
The official said that the latest aggressive banking by the SCBs might end up as more scams if the central bank does not monitor it properly.
Dhaka University economics professor MA Taslim earlier told New Age that the private sector credit growth continuously increased in the last few months but investment activities in the country were not that visible.
He said that such type of situation was created in 2011 and 2012 when the country’s state-owned banks faced large financial scams like Hallmark Group-Sonali Bank and Bismillah Group scams.
He feared that a section of people had recently taken from banks high-risk loans which might enter into the defaulted zone.
He said, ‘Money laundering from the country has continuously increased in recent years. A section of people might have taken the loans from banks and laundered the money abroad.’
The BB should take initiatives to stop recurrence of financial scams in the banking sector, he said.
Former interim administration adviser AB Mirza Azizul Islam said that the defaulted and written-off loans in the country’s banking sector had increased significantly in recent times.
The upward trend in the private sector credit growth will fuel the defaulted loans if the central bank fails to
bring the credit discipline in the banking sector, he said
The BB data, however, showed that the year-on-year credit growth in the overall domestic sector decreased to 14.04 per cent in FY16 from 9.97 per cent in FY15.
The total credit in the domestic sector stood at Tk 8,00,100 crore as of June of FY16 against Tk 7,01,526 crore as of June of FY15.

News Courtesy: www.newagebd.net