Bangladesh’s private sector credit growth rose to 10.09 per cent in October 2023, while it was 9.69 per cent in September the same year.
Bangladesh Bank sources confirmed the matter to The Business Post on Sunday evening. Private sector credit growth was 13.91 per cent in October 2022, which is 3.82 percentage points higher when compared to the same month this year.
Insiders believe that the slight growth in private sector credit does not show effective economic growth in the country.
On the issue, Managing Director and CEO of Dhaka Bank Emranul Haque said, “The economic crisis has been going on for the last two years. Importers cannot import due to the USD shortage.
“When imports decrease, the banks’ credit demands decrease automatically.”
He added, “I think that at the end of the year, the banks are trying to lend to the public sector to meet the lending target. If banks lend properly, then the balance sheet would be healthier.
“The development programme in the country is generally slow during the rainy season. But the progress of mega projects increases in winter, so banks can increase lending to the private sector as well.”
Private sector credit growth trend was comparatively good in the first six months of this year. During the period, the private sector credit growth was more than 11 per cent. But the country started witnessing a downtrend in private sector credit after June this year.
Arfan Ali, former managing director of Bank Asia, said, “The private sector credit growth slowed down during the April-October period because of the tight monetary policy. The central bank is trying to make money expensive, and reduce money flow due to the ongoing high inflation.”
The lending rate capacity increased as deposits slightly increased in the banking sector, said Policy Research Institute of Bangladesh (PRI) Executive Director Ahsan H Mansur.
The growth of deposits stood at 9.5 per cent in September, compared to the previous month of 2023.
Banks are currently offering around 4.38 per cent interest on deposits. Meanwhile, Bangladesh Bureau of Statistics (BBS) data shows that the annual inflation rate was 9.92 per cent in October this year.
Despite the upward trend of deposits, the banks are still facing a liquidity crisis. Last week, the central bank supported more than Tk 17,000 crore to the scheduled banks, and this figure indicates that several banks have been suffering from the liquidity crisis since last year.