Private-sector credit now grows higher as corporate entities looked back to local-currency loans, alongside offshore borrowing, amid a downturn in lending rates, bankers said.
Based on a higher flow of credits in December, the bankers hold the hope that the upward trend in private-sector borrowing would continue in the coming months, provided the political stability persisted.
The private-sector credit growth stood at 14.19 per cent in December 2015 year-on-year from 13.72 per cent in November, according to the central bank’s latest statistics. The growth was 13.22 per cent in October.
“Most of the banks are now offering single-digit interest rates on lending to encourage good-performing borrowers, particularly corporate clients, in expediting their business activities,” a senior official of a leading private commercial bank told the FE Wednesday.
He also said the private credit growth may increase further in the coming months if the declining trend in interest on lending continued.
The banks have already increased their investments in productive sectors, including agriculture and small and medium enterprises (SME), in line with the central bank’s advice, according to the private banker.
“Higher investment in productive sectors along with trade financing has contributed to rise in the private-sector credit growth during the period under review,” Mohammad Abdul Mannan, managing director and chief executive officer (CEO) of the Islami Bank Bangladesh Limited (IBBL) told the FE.
Mr. Mannan also said the overall investment may pick up in 2016. “We’ve already fixed our investment target considering the country’s overall economic situation.”
The Bangladesh Bank (BB) earlier had advised that the bank expedite their investment in productive sectors to facilitate achieving maximum economic growth by the end of this fiscal, a BB senior official said.
“We’ve already given a signal through slashing our policy interest rates to the bankers to increase investment by lowering their overall interest rates on lending in the near future,” the central banker explained.
Earlier on January 14 last, the BB slashed the policy rates aiming to spur investment, particularly in productive sectors, for achieving maximum economic growth by the end of this fiscal year.
Thus interest rate on repurchase agreement (repo) came down to 6.75 per cent from 7.25 per cent on 14 January last while the reverse repo rate was re-fixed at 4.75 per cent from 5.25 per cent.
The BB official also said the overall private-sector credit growth is still at a satisfactory level if the foreign-currency loans, taken by the corporate entities from both overseas and local sources, were considered.
The central bank earlier set the ceiling for private-sector credit growth at 14.80 per cent for the January-June period of the current fiscal year (FY), 2015-16.
Currently, outstanding total foreign-currency loans stood at around US$8.0 billion, according to the central banker.
He also said the outstanding amount of foreign-currency credits includes loan extended by Offshore Banking Units (OBUs) of local and foreign commercial banks and direct borrowing by the corporate entities through the approval by the Board of Investment (BoI).
The total outstanding loans with the private sector rose to Tk 6205.07 billion in December 2015 from Tk 5434.07 billion in the same month of 2014. It was Tk 6039.23 billion in November last