Zarif Mahmud: The credit growth in the private sector has been steadily declining. Businessmen are not going for new investments due to ongoing political unrest. Again, due to the dollar crisis, they are not able to open LCs as per demand. Besides, there is a liquidity crisis in the banking sector. So, the private sector loans are less than before. This has had a negative impact on growth.
At the end of last August, the private sector credit growth was 9.75 percent, in October it stood at 9.69 percent. This growth in private sector credit was the lowest in the last 23 months. Earlier in October 2021, private sector credit growth was 9.44 percent. It never fell below 10 percent after that. The current monetary policy has set a target of 10.90 percent credit growth in the private sector till next December.
According to the data of Bangladesh Bank, the credit status of the private sector at the end of last September stood at Tk 15 lakh 13 thousand 53 crore, which was Tk 13 lakh 79 thousand 413 crore at the same time last year. That is, the debt in this sector has increased by Tk 1 lakh 33 thousand 640 crores in the space of one year. The growth has been 9.69 percent.
And at the end of September in 2021, the debt status was Tk 12 lakh 10 thousand 722 crore. According to that, till September 2022, the debt in this sector increased by Tk 1 lakh 68 thousand 691 crores in one year. At that time the growth was 13.93 percent.
Bankers said that due to the sale of dollars from the reserve, a lot of money went from commercial banks to the central bank. Again, due to the record amount of defaulted loans, the lending capacity of the banks is continuously decreasing. Besides, a large part of private sector debt is spent on imports. However, due to the dollar-crisis, letters of credit (LC) are not being opened on demand. Besides, imports have been brought down recently through various regulatory measures to reduce pressure on the dollar. On the other hand, no one wants to take up new projects due to the fear of political instability. As a result, credit growth in the private sector has slowed down.
According to the data of Bangladesh Bank, in the last 16 months, Bangladesh Bank sold about $18 billion from reserves. In this, about two lakh crore taka from commercial banks moved to the central bank, due to which liquidity crisis occurred in the banks.
On the other hand, the defaulted loans of the banks are increasing, but they are not being recovered. Therefore, the lending capacity of the banks is decreasing. According to the information, at the end of June this year, the amount of defaulted loans stood at Tk 1 lakh 56 thousand 40 crores or 10.11 percent of the total loans.
An official of the central bank said that one of the reasons for not being able to give loans to the private sector is that the bonds which the central bank bought last year are now being bought by the commercial banks. Through this money is coming from the banks. This means that the government takes loans from commercial banks and gives them to the central bank through bonds.
According to the report, at the end of last June, the debt status of the government from commercial banks was Tk 2 lakh 36 thousand 138 crores. And at the end of October 18, the balance has increased to Tk 2 lakh 65 thousand 187 crores. In other words, the debt increased by Tk 29 thousand 49 crores in 18 days in three months.
On the other hand, during the same period, the government has repaid the debt of Tk 29 thousand 181 crores to the central bank. According to the report, the debt status of the government from the central bank at the end of last June was Tk 1 lakh 57 thousand 639 crores. And on October 18, it decreased to Tk 128,458 crore.
Syed Mahbubur Rahman, former chairman of Association of Bankers Bangladesh (ABB), an organization of chief executives of private banks said Daily Industry that LC openings have decreased due to the dollar crisis. It will decrease further in the future. Because the sources of dollar growth have had a negative impact. Being dependent on imports, credit from LCs increases. Now that LCs have come down, so has the demand for loans. That is why the growth is decreasing. Besides, due to the ongoing US dollar crisis, traders are facing problems in importing raw materials and capital equipment. Several expansion projects have also been delayed.
He also said that the customers are waiting for the upcoming national elections, they want to see the direction of the political situation. So, at the moment no one wants to make new investment.
A chief executive officer of a private bank, who did not want to be named, said that several banks are now facing liquidity shortages. Therefore, call money market and banking operations are conducted with liquidity support from the central bank.
According to the information of the central bank, last Tuesday, 13 public and private banks that were facing liquidity crisis borrowed Tk 13,046 crores from the central bank. These banks are borrowing because they are struggling to meet their daily needs of money.
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