Pvt sector credit growth hits 3yr high in Dec on lower bank rates [ Tritiyo Matra News ]

Pvt sector credit growth hits 3yr high in Dec on lower bank rates

Local February 04, 2016

The private sector credit growth in the country stood at 14.19 per cent in December 2015, which was the highest in last three years, as the clients are now taking credit from banks due to lower rates of interest on the banks’ loan products.
Overburdened with excess liquidity, most of the banks are now disbursing consumer loans with an interest rate of 13 per cent to 14 per cent, a Bangladesh Bank official said.
Credit flow to the private sector stood at Tk 6,20,506.90 crore in December 2015 against Tk 5,43,407.20 crore in the same month of 2014. It was Tk 6,03,922.70 crore in November 2015 against Tk 5,31,051.10 crore in November 2014.
According to the BB data, the private sector credit had registered highest 14.80 per cent growth in January 2013 after which it declined to 14 per cent in February of that year.
Since February 2013, the credit growth never reached to 14 per cent before December 2015 due to political violence and uncertainty, the BB official told New Age on Wednesday.
Banks usually disburse a good amount of loans in December, the last month of a year, to fulfil their annual targets, that pushes up the private sector credit growth in the period, he said.
He said, ‘We should have to observe the trend [of the private sector credit growth] in the next few months to take decision whether the country’s private sector credit growth would remain upbeat or not.’
He said that a number of banks had recently started aggressive banking by disbursing consumer loans with lower rates of interest to ensure their profitability that also played significant role in increasing the private sector credit growth.
The central bank, however, failed to achieve its private sector credit growth for the July-December period of 2015, which was set at 14.30 per cent.
Centre for Policy Dialogue executive director Mustafizur Rahman told New Age on Wednesday that it was good the credit growth in the private sector picked up in December, but not sufficient enough considering the country’s business volume.
Majority of the banks are now facing excess liquidity due to sluggish demand for loans from the businesspeople, he said.
The country is still facing political uncertainty that is hurting the business sector, he said.
The authorities concerned should ensure logistic support, productivity and competitiveness of the businesses to help the private sector credit growth rebound, he said.
The government should also keep focus on cost of doing business to strengthen the private sector, he said.
Mustafizur said that the government had to increase the private sector investment against the GDP ratio to 26 per cent instead of the existing around 22 per cent to ensure the GDP growth of 7-8 per cent.
Policy Research Institute executive director Ahsan H Mansur told New Age that the credit growth in the private sector increased in the first half of FY16 due to an eased situation on the political front.
The country’s export earnings have recently increased, which is an indicator of the good business environment, he said.
He, however, said that the central bank should increase the private sector credit growth to 16 per cent to 17 per cent in the coming months to make vibrant the business sector, he said.
The BB data, however, showed that the year-on-year credit growth in the overall domestic sector decreased to 9.93 per cent in December from 10.31 per cent in November last year.
The domestic credit growth decreased as the government borrowing from the banking sector dropped significantly in recent months.
The total credit in the domestic sector stood at Tk 7,40,644.50 crore as of December 2015 against Tk 6,73,734.40 crore as of December 2014. It was Tk 7,30,275.90 crore as of November 2015 against Tk 6,62,039.20 crore as of November 2014.