Private sector credit growth in Bangladesh slightly decreased in September, compared to its previous month, as banks are more conservate when it comes to lending money as liquidity has decreased.
Credit growth stood at 11.93% in September, compared to 14.07% in August, according to Bangladesh Bank data.
According to central bank data, private sector credit growth was 8.38% in July 2021. This was followed by six consecutive months of growth to 11.07% in January 2022.
Growth slowed slightly to 10.87% in February this year, then continued to increase until August. It fell by 10 percentage points in September.
Sector insiders said that most global banks tightened their monetary policy to control inflation by reducing the money flow.
The Bangladesh Bank has also reduced the private sector credit growth in FY23 to 14.01%, but it is still very high considering the low interest rates in recent times.
After the Covid-19 pandemic subsided, private sector credit increased heavily as the import costs jumped due to an increase in import volume.
The Russia-Ukraine war worsened the crisis.
The country's imports have been decreasing for the past few months due to the central bank's restrictions on imports.
In September, the rate of LC opening fell by 31.16%, compared to the previous year.
In September, traders opened LCs involving $5.70 billion, which was $8.28 billion in the same time of the previous fiscal year.
That means LC opening dropped by $2.58 billion compared to the same period of last year.
Besides, the central bank has also raised the repo rate on four occasions in recent times in an attempt to control the ongoing inflation by reducing money flow.
Banks have to borrow money from the central bank at 5.75% since 2 October.