Lower demand for banks’ credit from the businesspeople pushed down further the credit growth in the private sector with its growth dropping to below 12 per cent in May year-on-year basis, according to the latest Bangladesh Bank data released on Thursday.
The credit growth in the private sector slumped to 11.43 per cent in May compared with that of 18.40 per cent in the corresponding month of 2012.
The BB officials told New Age that the businesspeople were now reluctant to expand their business due to the recent political situation.
The shortage of gas and electricity is another cause of not expanding their business, he said.
The credit flow to the private sector in May stood at Tk 4,44,153.40 crore against Tk 3,98,594.40 crore in the same month of 2012. The credit flow was Tk 3,36,638.20 crore in May 2011.
A BB official said that the central bank’s initiative had failed completely to make the private sector vibrant by implementing an expansionary monetary policy for January-June of 2013.
The BB set a credit growth target of 18.50 per cent for the period instead of projected target of 18 per cent amid repeated demand from the businesspeople.
‘But, the credit growth in the private sector declined in the last few months of this year due mainly to the ongoing political unrest,’ the official said.
The businessmen have adopted a ‘wait and see’ approach in increasing their business amid political violence which massively dropped the credit demand from the banks, he said.
The majority of the businessmen are now taking preparation to expand their trade and commerce after the next national elections, he said.
The BB cut down its policy interest rate few months back to encourage credit flow to the private sector.
The central bank slashed its interest rates on repurchase agreement (repo) and reverse repo by 50 basis points on January 31, 2013 after nearly four years.
The BB took the initiative to encourage new investments, particularly in the productive sectors, the official said.
But, the initiative of the central bank has virtually failed due to lower credit demand from the businesspeople.
Because of a dull situation in the private sector, the government failed to achieve its expected GDP growth in the just concluded fiscal year.
According to the Bangladesh Bureau of Statistics, the provisional GDP growth of the country is 6.03 per cent, although the government set a target of 7.2 per cent for the year.
The recent scams in the banking sector are the other reasons for the declining trend in the credit flow to the private sector, another BB official said.
He said that the majority of the commercial banks now took cautious policy to sanction fresh loans due mainly to the recent loan scams that rocked the banking sector.
The cautious policy taken by the banks has already hindered the import and export related business as the businesspeople are reluctant to open fresh letters of credit by giving higher margin with the banks, he said.
Under the circumstances, the operating profit of the banking sector declined significantly in the first half of this year, he said.
The BB data showed that credit growth in the overall domestic sector slumped to 13.64 per cent in May compared with that of 19.95 per cent in the corresponding month of 2012.
The total credit in the domestic sector in May stood at Tk 5,74,160.20 crore against Tk 5,05,227.20 crore in the same month of 2012.
-With New Age input
