Private sector credit growth dips

Private sector credit growth dropped significantly in September as both lenders and borrowers remained cautious ahead of the national elections, said banking sector sources.

The credit growth in the given month registered a 14.67% growth, down from 14.95% a month earlier, according to the latest data of Bangladesh Bank (BB).

Senior bankers predict the lending growth will come down further in the coming months as banks now tend to disburse loans cautiously ahead of the national elections.

According to BB data, at the end of September, the amount of private sector credit stood at Tk 9,18,745 crore, which was  Tk 8,01,225 crore a year earlier.

Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh, told the Dhaka Tribune, “Basically due to three reasons the credit growth continues to go low over the months. First of all, the decision taken by banks to bring down the lending rate to a single digit held back extra lending. Second, due to the upcoming elections, the demand for real entrepreneurs appeared low that caused banks to disburse loans cautiously.”

“Third, due to strict adherence to ADR (advance-deposit ratio) limits, banks did not lend aggressively,” said Rahman, also the managing director of Dhaka Bank.

The central bank's decision to slash the loan-deposit ratio by 1.5 percentage points to 83.5 percent was one of the main reasons behind the declining credit growth, according to BB sources.  

On January 30, the BB instructed banks to implement the new ratio by March next year. More than 25 banks were above the authorised limit of the ratio in December last year.

“Banks are tightening credit activities to bring down their loan-deposit ratio as per the central bank's directive. The deposit growth of banks is now lower than the credit growth. So, we are sanctioning loans cautiously, which is having an impact on growth.” said MA Halim Chowdhury, managing director of Pubali  Bank.

As of June 30, nonperforming loans in the country’s banking sector stood at Tk89,340 crore.