Monetary Policy
Pvt sector credit growth cut to hit investment: DCCI
The Dhaka Chamber of Commerce and Industry on Sunday said that the recently announced monetary policy with the target of reducing the private sector credit growth would cut investment drastically.
‘The notable aspect of this monetary policy is the reduction of private sector credit growth target to 16.5 per cent, which was 18.3 per cent in the financial year 2012–13. The DCCI feels that as a result of this, investment in private sector will be reduced drastically,’ the trade body said in a statement.
Earlier, on July 25, Bangladesh Bank declared the new monetary policy for the first half of the FY 14 in light with the continuous dynamism of both global and local macro economy.
The target of attaining 7.2 per cent GDP growth will not be possible as the newly declared monetary policy reduces the private sector credit growth target, the DCCI release said.
It said: ‘The DCCI thinks that to achieve the targeted GDP growth rate, it is essential to increase the production of the productive sectors; and for that reason
huge investment and financing is required.
‘So, it is essential to increase the private sector credit flow. If the interest rate on private sector loan is not reduced to a reasonable level, the flow of private sector credit will not be increased and the idle money lying with the banks cannot be invested.’
The trade body said there is no specific guideline to reduce the interest rate though it is mentioned that the spread of interest rate has been reduced from 5.60 per cent in June 2012 to 4.98 per cent in June 2013.
The Dhaka chamber feels that the new monetary policy has projected realistic GDP growth rate to 6.2 per cent in light of the partial contractionary policy without looking at the target mentioned in the national budget 2013–14.
The monetary policy also assumes government borrowing from the banking sector as budget deficit financing will remain around the budgetary figure of Tk 260 billion which is a positive aspect. But, Bangladesh Bank should have a role through monetary policy to ensure that this target is not exceeded by any way.
Bangladesh Bank has taken measures to ease the transmission channel of monetary policy to properly apply the declared monetary policy. The aspect of making the activities of the secondary market of government and private sector credit easy and strong is specially mentioned in the policy statement.
The fact of using online information technology to strengthen the strict internal control and surveillance system with a view to implementing good governance in the banks of the country is also mentioned in the statement.
The Dhaka chamber feels that if these steps are implemented, the financial mismanagement of the commercial banks will be reduced.
-With UNB/New Age input
