Sajjadur Rahman
The sectoral distribution of bank credit has marked a significant change, with a majority share going for trade financing, central bank data show.
Some 35.4 percent of total bank credit was meant for the trade financing as of September 2008, which was only 18.7 percent in March.
Up to September, the bank advances for industrial purposes reached 21.1 percent from 27.2 percent six months ago.
Senior bankers blamed the commodity price hike and subsequently a rush in opening of letters of credit (LC) for the trade financing. Some mid level private bank officials think that trade financing has increased because the banks are encouraged to do such financing on the plea that higher and faster repayment is ensured.
“A considerable number of LC was opened during the July-September quarter of 2008 on a speculative further rise in the commodity prices in international market,” said Mahmud Sattar, managing director of The City Bank.
Prices of commodities, including rice, wheat, edible oil and petroleum products all were in the peak till the third quarter of 2008. Prices of some of these products quadrupled in a year.
Sattar, also president of the Association of Bankers Bangladesh (ABB), a forum for bank chief executives, predicted a fall in the credit for trade sector in October-December period because of a price-drop.
BB data show domestic credit increased by Tk 17,412.9 crore or 7.0 percent during July-October 2008 as against Tk 10,007.7 crore or 4.87 percent during the same period a year earlier.
On the other hand, private sector credit grew by Tk10, 370.5 crore or 5.45 percent during July-October 2008 compared to a Tk 8,593 crore or 5.65 percent rise in the same period a year earlier.
Only 21.1 percent of total bank advances were for industry, 35.4 percent for trade, 2.3 percent for transport and communication, 16.0 percent for working capital, 6.8 percent for agriculture and 18.4 percent for other purposes.
As per BB data on bank advances up to March 2008, 27.2 percent was industrial, 24.7 percent working capital and 18.7 percent for trade on year-on-year basis.
“Credit to trade sector generates a handsome income from different commission and charges,” a mid level official of a private bank said.
On the declining trend in industrial financing, the ABB president said there was no big investment proposal in 2008.
Mahmud Sattar also differed with the central bank on the so-called ‘unproductive sector’.
“I don’t believe there is any unproductive sector,” he categorically said. Consumer credit generates power for consumption of people, he added.
Courtesy: thedailystar.net
