The private sector credit growth fell drastically in November of last year compared with that in October mainly due to a money supply tightening stance taken by the Bangladesh Bank, said officials of the central bank.
According to the BB data released on Thursday, the private sector credit growth decreased to 17.41 per cent in November from that of 18.38 per cent in October, although the central bank had set a credit growth target of 18 per cent for its July-December monetary programme in 2012.
BB officials and economists said the gross domestic product expected for this financial year would decrease due to the lower credit flow to the private sector.
Dhaka University economics professor MA Taslim told New Age on Thursday that a high government bank borrowing was one of the main causes of the lower credit growth to the private sector.
He said that the government continued to take loans from the banking source like previous financial year, putting a negative impact on the private sector and the industrialisation process.
He said, ‘The interest rate of the banks’ loans has increased significantly due to the government borrowing. As a result, the private sector is deprived of getting expected amount of credits from the banks.’
Under the circumstances, the expected GDP growth of 7.20 per cent will not be achieved and it may decrease to below 6 per cent.
The BB has squeezed money supply to the private sector to keep inflation in check, but the money supply to the public
sector has also to be controlled to achieve the objective, Taslim said.
The BB data showed that the private sector had suffered a fall in the credit growth for the consecutive five months in this financial year as the credit growth was 20.25 per cent in July, 19.93 per cent in August, and 19.88 per cent in
October.
The credit disbursement to the private sector, however, increased to Tk 4,24,817.80 crore in November, which was 17.41 per cent higher than
that of the same month of the FY 2011-12 when the figure was Tk 3,61,838.60 crore.
The BB data showed that the credit disbursement by banks and non-bank financial institutions in October 2012 to the private sector increased to Tk 4,22,538.10 crore, which was 18.38 per cent higher than that of the corresponding month of the FY 2011-12 when the figure was Tk 3,56,919.60 crore.
A BB official told New Age on Thursday that the central bank had recently squeezed the money supply to the commercial banks through special repurchase agreement and liquidity support facility.
Moreover, the central bank is moping up surplus liquidity from the banks through 30-days BB bill in a bid to tackle soaring inflation, he said.
The central bank usually arranges the auction of BB bills in one day of a week, but it now holds the auction in two days, he said.
Another BB official said that a decreased import growth in the last few months had also contributed to the declining trend in the private sector credit growth.
Many banks have not opening an expected number of letters of credit after the Hallmark Group-Sonali Bank scam.