Private sector credit growth dropped in January due to a liquidity shortage, weakened loan disbursement capacity by banks and persistent economic challenges.
According to Bangladesh Bank data, the private sector credit growth dropped to 9.95% in January against 10.2% in December last year.
It was 9.9% in November and 10.09% in October 2023.
The central bank in its monetary policy statement lowered the private sector credit growth target to 10% in January-June for FY24 from the previous target of 11%.
In its monetary policy, they also said that this subdued growth might be attributed to reduced interest from private sector investors, stemming from higher borrowing costs, ongoing global and domestic economic uncertainties, liquidity constraints within the banking sector and the pursuit of a contractionary monetary policy.
The Bangladesh Bank also continued foreign currency sales, which functioned as automatic quantitative tightening measures in the money market, significantly absorbing liquidity from the system, it said.
Over the past 31 months, the central bank sold approximately $30 billion from its reserves, with $9 billion allocated to banks in July-January of the current FY24, $13.5 billion in FY23, and $7.62 billion in FY22.
The exchange rate reached Tk110 from Tk90 against the US dollar within a year.
The private sector credit growth was 8.35% in FY21, 13.66% in FY22 and 10.57% in FY23.