Fall in credit growth may affect the yearly profit earning of the country’s commercial banks in 2013, said a senior banker.
He said as the banks’ deposit could not be mobilised during the year due to intensifying political unrest, the annual profits will drop.
“This is a very bad situation for the banking sector. Unrest will push the profits down,” said Ehsan Khasru, managing director of Prime Bank.
Bangladesh Bank data showed overall credit growth in the first 11 months of the year slowed to 9.5% against the central bank’s target of 15.5% in its monetary policy.
The credit has been growing at single-digit rates since June.
Credit demand from the entrepreneurs has been sluggish as they are not willing to make any investment in such a situation gripped by political chaos.
Ehsan Khasru said the non-performing loans (NPL) will be higher as the amount of idle money in the banks has soared thanks to the ongoing political unrest.
“Currently, NPL is 12%, which may exceed 15% at the end of the year. This is very bad for the banking sector.”
According to Bangladesh Bank data, the private sector credit in first quarter of current fiscal year grew by 12% compared to 19.3% a year ago.
The banks’ advances to the transports and communication sector had fallen to 43.5% in first quarter of this fiscal.
The credit to the industrial, construction and business sectors decreased respectively by 8.9%, 9.9% and 12.9% in the period.
The highest share of bank advances went to the business sector, which was 38.7%, followed by industrial sector’s 19.9% and working capital financing’s 15% in the period.
“Banks’ credit is falling sharply due to many factors. Political uncertainty is a major factor,” said Ehsan Khasru.
He also said the banks have also become now the target of attacks by the political activists.
“We could not refill ATM booths and meet demand for last one month due to political unrest.”
The banking business would be hit hard if money remained stuck and could not be mobilised, he said.
According to the central bank data, the state-owned commercial banks also witnessed fall in credit.
The credit grew by 2.79% in 11 months of 2013.
The provision shortfall of the banking sector increased to Tk3,280 crore in September from Tk2,460 crore in June.
Return on assets, an important measure of bank profitability, declined marginally to 0.61% at the end of June, 2013 from 0.64% at the end of December 2012, according to the Bangladesh Bank’s quarterly report.