Private sector credit growth lags behind BB target [ Tritiyo Matra News ]

Private sector credit growth lags behind BB target

Local January 08, 2016

The private sector credit growth increased slightly in November from that of the previous month, but still remained lower than the target set in the monetary policy as the businesspeople are still concerned about business expansion amid political uncertainty.
According to the latest Bangladesh Bank data, the year-on-year credit growth rate in the private sector rose to 13.72 per cent in November compared with that of 13.22 per cent in October of this year.
The private sector credit growth was 12.88 per cent in September, 12.69 per cent in August and 12.96 per cent in July.
BB officials, however, fear that the private sector credit growth would not increase much in the months to come due to the existing dull business although the growth maintained a slower upward trend in the last three months.
The central bank has set a target for the private sector credit growth at 14.30 per cent for the July-December period of the financial year 2015-16.
Credit flow to the private sector stood at Tk 6,03,922.70 crore in November 2015 against Tk 5,31,051.10 crore in the same month of 2014. It was Tk 5,94,677.40 crore in October 2015 against Tk 5,25,233.30 crore in October 2014.
‘The violent political conflicts in the first few months of last year over the process of holding general elections and the ongoing political uncertainty hit the private sector,’ a BB official told New Age on Thursday.
In the situation, the businesspeople adopted a ‘wait and see’ approach to their business expansion, he said.
Former interim government finance adviser AB Mirza Azizul Islam earlier told New Age that the commercial banks had recently cut their interest rates on lending but they failed to attract the businesspeople to take loans.
The situation indicates that the country’s existing economic environment is unfriendly for expanding business, he said.
The ongoing political uncertainty and deterioration in law and order situation were the key causes of the lower private sector credit growth, he said.
‘The businesspeople think that they might default on loans if they take fresh credits from banks now amid the sluggish business situation,’ Mirza Aziz said.
Association of Bankers, Bangladesh president Anis A Khan on Tuesday, after a bankers’ meeting at the central bank headquarters, told the reporters that the excess liquidity amid the sluggish business was still a matter of concern for the banking sector.
The political instability fuels up at times which discourage the entrepreneurs for expansion their business, he said.
The private sector credit growth stood at 13.19 per cent in the FY15 against the central bank’s target of 15.50 per cent.
The BB failed to achieve the private sector credit growth targets in recent financial years due to the political unrest and uncertainty.
‘The country’s ideal credit growth is between 17 per cent and 18 per cent. But, it is not possible to achieve the growth right now due to the ongoing sluggish investment situation,’ another BB official said.
Some of the large borrowers are now overburdened with debts while a good number of them have already become loan defaulters, he said.
The official said the private sector credit growth would face hurdle in the coming months if the existing political uncertainty and corrosion of law and order situation prevailed.
The BB data showed that the year-on-year credit growth in the overall domestic sector also increased to 10.31 per cent in November from 10.06 per cent in October.
The total credit in the domestic sector stood at Tk 7,30,275.90 crore as of November 2015 against Tk 6,62,039.20 crore as of November 2014. It was Tk 7,23,453.40 crore as of October 2015 against Tk 6,57,339.20 crore as of October 2014.