The government borrowing from the scheduled banks increased significantly in the first 10 months of the current fiscal year as the banks are investing their idle fund in government securities.
The overall borrowing from the banking source, however, decreased in the period.
According to the latest BB data released on Tuesday, the government borrowing from the scheduled banks stood at Tk 17,393.09 crore as of May 5, 2013, but the overall government borrowing from the banking source stood at Tk 10,744.18 crore in the period.
The government repaid the central bank Tk 6,648.92 crore as of May 5 pushing down its overall bank borrowing to Tk 10,744.18 crore in the period.
A BB official told New Age on Tuesday that the overall bank borrowing by the government had been declining for the last few months as the government got a significant amount of loan from the foreign sources.
Besides, majority of the commercial banks are now going to invest their idle fund in the government securities as the credit demand from the private sector is very low due to the ongoing political unrest, he said.
The businesspeople are now reluctant to take loan from the banking source as they have recently adopted a ‘wait and see approach’ to expand their investment, the official said.
The BB data showed that the scheduled banks invested Tk 19,973.12 crore in the government securities from July 1, 2012 to May 5, 2013 of which Tk 9,763.79 crore was invested in Treasury bills and Tk 9,609 crore in Treasury bonds.
The 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 the BB official.
The credit growth in the private sector slumped to 12.72 per cent in March this year compared with that of 19.45 per cent in the corresponding month of 2012.
Under the circumstances, majority of the banks are now enjoying surplus liquidity, he said.
For this reasons, banks are investing their idle fund in T-bonds and T-bills with a lower interest rate ranging between 8 per cent and 12 per cent, he said.
The operating and net profit of the banks may decrease this year as the loan disbursement to the client is one of the pivotal businesses for any bank, he said.
The government’s bank borrowing is yet to reach an intolerable level as the government has set a target of taking Tk 23,000 crore in loan from the banking system in the budget for the FY 2012-13, another BB official said.
The government borrowing from the banking source might not cross the target this financial year as the inflow of foreign loan and grant are now in a satisfactory condition, he said.
-With New Age input