Credit growth in the private sector declined to below 13 per cent in March on year-on-year basis for the first time since the financial year 2009-10 due mainly to recent political unrest,
said economists, businessmen and bankers.
They said that such low credit growth in the private sector indicated that the country’s investment sector was now facing a severe crisis which would ultimately hit the expected growth rate in the gross domestic products for financial year 2012-13.
According to Bangladesh Bank data released on Thursday, credit growth in the private sector slumped to 12.72 per cent in March compared with that of 19.45 per cent in the corresponding month of 2012.
Credit flow to the private sector in March stood at Tk 4,36,354 crore against Tk 3,87,121.60 crore in the same month of 2012.
The central bank took a slightly expansionary monetary policy for January-June of 2013, setting a credit growth target of 18.50 per cent for the period amid repeated demand from the business people.
A BB official told New Age on Thursday that the expected credit growth in the private sector for the current term might not be achieved as the credit demand from business sector was still very low.
Under the circumstances, a number of banks recently observed that their advance-deposit ratio continued to decline in the last few months.
The BB data showed that the ADR in the banking sector had declined to 75.28 per cent as of March 14, 2013 from 76.95 per cent as of January 10, 2013. The ADR was 80.33 per cent as of June 7, 2012.
The credit growth in the private sector also declined to 6.98 per cent in July-March of the FY 2012-13 compared with that of 13.62 per cent during the same period a year ago.
Dhaka University economics department chairman MA Taslim said that credit growth in the private sector had massively slummed due to absence of a vibrant investment climate.
No businessman is now interested to expand their investment due to the ongoing political unrest, he said.
The import of industrial raw materials and capital machinery declined severely in the last few months which played a significant role in the downtrend of credit growth in the private sector.
‘The businessmen have taken a “wait and see” policy in expanding their investment as they think that the present situation is not secure enough for their trade and commerce.’
Besides, the external factor is another pivotal cause of the declining trend in the private sector credit growth, Taslim said.
Federation of Bangladesh Chambers of Commerce and Industry president Kazi Akram Uddin Ahmed told New Age that there would be no scope to increase the private sector credit growth if the current political violence persisted in the days to come.
The frequent shutdowns called by the political parties have hit the credit growth as they are engaged in a destructive politics harming the country’s economy, he said.
He, however, hoped that the ongoing unrest situation would be eased in the quickest possible time.
The BB data showed that credit growth in the overall domestic sector slumped to 12.82 per cent in March compared with that of 22.45 per cent in the corresponding month of 2012.
The total credit in the domestic sector in March stood at Tk 5,59,652.60 crore against Tk 4,99,535.9 crore in the same month of 2012.
-With New Age input
