Private sector credit growth rose sharply to 14.8% in the first month of current year surpassing the three year’s high of 14.2% growth achieved in December last.
The new height of growth touches the credit ceiling of 14.8% set for June in the latest Monetary Policy Statement (MPS) of January-June this year.
The net credit at private sector stood at Tk6,20,500 crore in January against the ceiling of Tk6,18,400 crore set for the month in monetary policy.
The total credit rose by Tk16,600 crore during the first month of current year from Tk6,03,900 crore in December last year.
Bangladesh Bank is not concerned about the sharp rise of private sector credit growth as public sector credit growth is still far below its target, said Allah Malik Kazemi, change management adviser to the central bank.
He said though the private sector credit growth already reached the target set for June, it will not put pressure on inflation until public sector credit growth crosses the ceiling of monetary programme.
He assumed that the rise in credit growth will continue as economy started to move forward.
He said banks are still overburdened with excess liquidity despite the rise in public sector credit growth as the government is not taking money from the banking system.
As a result Bangladesh Bank has been taking money from the banks through issuing treasury bill.
Bangladesh Bank is taking Tk20,000-Tk24,000 crore every week from the banks through treasury bill, according to the central bank data.
Even several months ago, the central bank moped up money through reverse repo at 4.75%, but recently it started to mop up through treasury bill at 3% interest rate instead of reverse repo to reduce the cost.
The government is paying additional cost for managing excess liquidity, but the cost will go down if it starts borrowing from banking system, said Kazemi.
The government has to pay more if it takes money from saving instrument instead of banking system, he said, adding that even taking money from saving instrument is preferred only to protect pensioners.
Public sector credit growth remained downward in January reaching the negative 8.7% from 8.1% in December last year.
The growth was far below the target of 11.6% set for March in the monetary programme.
The total domestic credit growth also remained slower due to negative growth in public sector. The domestic credit growth stood at 10.5% in January against the ceiling of 13.7% set for March in monetary programme.
The credit growth to private sector rose sharply as bankers focused on small enterprises to expand credit areas, said a senior executive of a private bank.
Moreover, the central bank repeatedly instructed the banks to give priority on SME loans while big entrepreneurs were allured by foreign loans, he said.
Of the total loans, 24% went to the SME sector in the year 2015 while the rate was 19% in the year 2009, according to the central bank data.