Pvt sector credit growth above BB target

FT ONLINE

Private sector credit growth fell in May, for the third consecutive month, but remained well above the central bank projected limit against lower growth in deposit.

According to a latest Bangladesh Bank statement released last week, year-on-year private sector credit growth stood at 17.60 per cent in May.

The growth rate, however, is still more than the central bank’s target of 16.8 per cent for the second half of the fiscal year 2017-18.

The credit growth rate was 17.93 per cent in March and 17.65 per cent in April. The rate was 18.36 per cent in January and 18.49 per cent in February.

As the private sector credit growth was higher compared with BB’s projected 16.3 per cent for the first half of the 2017-18 fiscal, the central bank set an enhanced growth target for the second half.

In the ongoing fiscal, the credit growth was above BB estimation in each month so far, while the growth was below 17 per cent for only one month — 16.94 per cent in July 2017.

On the other hand, the total domestic credit growth was 15.15 per cent in May while domestic credit posted 11.02 per cent growth during July-June of the fiscal year 2017-2018. 

The domestic credit growth, however, was bellow the central bank-projected 15.8 per cent for fiscal year 2017-2018 mainly due to 21.20 per cent negative growth in government borrowing from banks.

Policy Research Institute executive director Ahsan H Mansur told New Age, ‘Although the private sector credit growth remained strong, overall credit growth is not that significant.’

‘This is due to poor growth in deposits,’ he pointed out.

Broad money, representing overall deposits, in the banking sector posted a 10.2 per cent year-on-year growth in May this year while the growth was 6.12 per cent during July-May of the FY18, according to central bank data. 

In the banking system, broad money growth was 10.88 per cent in the fiscal year 2017-2018, it shows.

The prevailing situation suggests liquidity crisis in the banking system as majority of the deposits are going to the government-owned banks and the credit growth is taking place in the private commercial banks, Mansur says.

Due to the liquidity crisis in the banks, a number of banks are offering around 12 per cent interest against
deposits.

Meanwhile, the private commercial banks within the liquidity situation have announced that they will bring down their lending rate to 9 per cent, specifically for industrial loans.

As per the central bank data, total domestic credit stands at Tk 9,88,907 crore at the end of May this year against Tk 10,78,298 crore broad money.