Private-sector credit growth dropped to 13.93 pc in Sept

LC opening restraint

Industry Desk: Data analysis showed that after growing for six straight months, private sector loan growth dropped to 13.93% in September.
Private sector loan growth decreased from 11.07% in January to 10.87% in February of this year.
After six months of growth, the private sector’s credit growth slowed in September for a number of reasons, including tighter LC opening due to volatility in foreign reserves, continued inflation, and the energy crisis in the manufacturing sector.
Recent data from Bangladesh Bank show that private sector loan growth in September was 13.93%, after growing for six straight months.
This trend was rising from the month of March of this year.
In March, April, May, June, July, and August this rate was 11.29%, 12.48%, 12.94%, 13.66%, 13.95% and 14.07% respectively. Bankers and economists say that the central bank’s tightening measures to protect foreign-exchange reserves by strictly monitoring LC opening might be a prime cause behind the fall in private-sector credit growth.
Zahid Hussain, lead economic consultant for the World Bank said: “The decline in imports continued in September. Besides, due to load shedding and fuel crisis, our production capacity has decreased to some extent. In other words, the private sector did not need much credit for investment. Therefore, the growth of this sector also decreased in September compared to the previous month.”
Asking about earlier rising trends the renowned economist said: “Earlier the main reason for the growth in this sector was the dollar rate. As a result, the cost of import increased by taka, hence the growth of the private sector also increased in the earlier last few months.”
Inflation is another reason and taming it is still the main challenge for policymakers.
In order to reduce the impact of the upcoming recession on the economy and if they fail to do it properly, we will have a severe effect due to the recession,” he warned.
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank Limited said: “Last few months LC opening came almost to a halt and I think the credit fall is a reflection of it.”
“Another reason it may be careful in releasing funds amid the ongoing liquidity stress is that banks want to maintain a good balance sheet at the year-end. But we need to wait further to understand the private sector growth trends because it’s just one month’s data,” he added.
The drop in private sector loan growth, however, occurs just as it was beginning to approach Bangladesh Bank’s targeted goal of 14.1% for the current fiscal year (FY23).
In FY22, this monetary target was 14.8%, although the last fiscal year ended with a growth of 13.66% in June and the average credit growth of FY22 was 10.67%.