Fourteen scheduled banks posted a negative credit growth as of the end of May 2014 on year-on-year basis due to a stagnant situation in the business sector, said officials of Bangladesh Bank. According to the latest BB data, the overall credit growth of the scheduled banks also decreased remarkably against the deposit growth as of May 29. The deposit growth and the credit growth of the banking sector stood at 15.65 per cent and 9.03 per cent respectively as of May 29, 2014 on year-on-year basis.
The BB officials told New Age on Thursday that the credit growth in the banks had declined gradually in the last one and half years as the businesspeople were now reluctant to expand their investment by taking loan from the banks amid political uncertainty.
The 14 banks which posted a negative credit growth are: Sonali Bank (-10.99 per cent), Agrani Bank (-6.71 per cent), Janata Bank (-3.40 per cent), ICB Islamic Bank (-6.48 per cent), Eastern Bank (-5.82 per cent), Prime Bank (-0.15 per cent), Dutch-Bangla Bank (-0.21 per cent), Shahjalal Islami Bank (-1.75 per cent), BRAC Bank (-2.13 per cent), Standard Chartered Bank (-10.70 per cent), State Bank of India (-31.69 per cent), Commercial Bank of Ceylon (-20.73 per cent), Citibank NA (-22.67 per cent) and HSBC (-1.37 per cent).
The lower credit growth by the banks indicates that majority of the scheduled banks are now sitting on the excess fund, a BB official told New Age.
The businessmen have adopted a ‘wait and see’ approach to expand their business due to the recent spates of political uncertainty as the political alliances are yet to reach a consensus over the process of holding general elections, he said.
Against the backdrop, the excess liquidity excluding the statutory liquidity ratio in the banking sector increased to Tk 1,20,675 crore as of March 31, 2014 from Tk 58,988 crore as of March 31, 2013.
Due the excess liquidity in the banking sector, the BB raised the cash reserve requirement by 50 basis points to 6.5 per cent for the banks on June 24 this year to curb inflationary pressure on the economy.
The central bank targeted to mop up around Tk 3,000 crore from the banks by increasing the CRR.
The year-on-year credit growth rate in the private sector stood at 11.39 per cent in May against 11.86 per cent in April due to the lower credit disbursement by the banks.
The BB monetary programme for January-June 2014 set a target of 16.50 credit growth in the private sector.
The BB official said that the operating profit of the banking sector might decline in the coming months as the loan disbursement was a pivotal business for the banks.
Some banks, however, maintained an upward trend in operating profit in the first half of this year as they gained the majority amount of the profit by giving loan to the government, he said.
But, the borrowing demand from the government has recently declined significantly which may put an adverse impact on the banks’ profit, he said.
Due to lower credit demand from the businesspeople, the advance-deposit in the banking sector declined massively in the recent months.
The ADR stood at 70.45 per cent as of May 29, 2014 which was 74.90 per cent as of May 7, 2013. The ADR was 76.59 per cent as of December 31, 2012, and 80.33 per cent as of June 7, 2012.
-With New Age input
