Private sector credit growth remained well below the target set by monetary policy of Bangladesh Bank for the first half of the current fiscal year (2014-15) due to the sluggish investment climate amid political unrest.
The credit growth stood at 12.7% in November – 1.3 percentage point below the 14% growth target for December last year, according to the central bank data.
Bangladesh Bank is going to unveil its second half monetary policy on Thursday for January-June period of the fiscal year, keeping the private sector credit growth target unchanged at 15.5% like the first half.
“Though credit growth has rebounded in the recent months but the trend may be affected as the political unrest is intensifying further,” said a senior executive of Bangladesh Bank.
Considering the political unrest and uncertainty, monetary policy stance on private sector credit growth will be kept unchanged, he added.
According to Bangladesh Bank data, the private sector credit growth remained between 11% and 12% in the last six months. The credit growth could not reach the ceiling in line with the monetary stance since December 2013.
The actual credit growth was 10.6% in December 2013 against the projected growth of 15.5%. The growth rate was also far below at 12.3% in June 2014 against the target of 16.5% during the last year.
Credit to the public sector also witnessed a slower growth with posting 6% progress in November against the ceiling of 14% by December 2014.
However, the public sector credit went up to 12% in September last year, crossing the limit of 9%.
Bangladesh Bank Change Management Advisor Allah Malik Kazemi said: “The interest rate was reduced, as the banks were not so crowded with credit demand. Moreover, foreign loan inflow also helped to meet the local credit demand.”
He, however, observed that the credit demand rose in recent times as the call money rate rose up to 8%.
“We did not consider the political issues in the upcoming monetary policy stance as it is difficult to predict over the prevailing situation”, he said.
He said the new monetary stance would not be eased, as there was always inflation risk though food inflation declined but non-food inflation is still on rising trend.
The average inflation eased due to the fall in commodity prices both in domestic and international markets but it is still challenging to keep it down at 6.5% by December 2015 that was projected earlier, he opened.
The interest rate spread came down to 5.17% in November from 5.31% in June last year thanks to the reduced lending and deposit rates, according to the central bank data.
The interest rate on advance and deposit stood at 12.49% and 7.32% respectively in November compared to 13% and 7.79% in June last year.