BB's latest data shows at the end of November 2018 the amount of private sector credit stood at Tk9,42,793 crore, which was Tk8,26,943 crore a year earlier
Private sector credit growth slumped to a three-year low in November as both lenders and borrowers remained cautious ahead of the 11th parliamentary elections, held on Sunday.
The credit growth stood at 14.01%, the lowest since November 2015, according to data by the Bangladesh Bank (BB).
BB's latest data shows at the end of November 2018 the amount of private sector credit stood at Tk9,42,793 crore, which was Tk8,26,943 crore a year earlier.
Speaking to the Dhaka Tribune Chairman of the Association of Bankers, Bangladesh (ABB) Syed Mahbubur Rahman, said credit growth has continued to slump over the months for three main reasons.
"Firstly, the decision taken by banks to bring down lending rates to a single digit number held back extra lending," explained Mahbubur, also the managing director of Dhaka Bank.
"Furthermore, demand for credible entrepreneurs seemed low because of the elections, causing banks to disburse loans much more cautiously. Banks also refrained from aggressive lending to strictly adhere to ADR [advance-to-deposit ratio] limits,” he added.
On January 30, 2018, the central bank ordered all traditional banks to lower their ADR below 83.50% by June, 2018 from the existing ceiling of 85%. Similarly, Islamic banks were ordered to lower their ADR below 89% from 90%, to control aggressive lending practices.
More than 25 banks were above the authorized limit of the ratio in December 2017.
However, following requests from bank directors, the central bank postponed implementation of the new ADR till March of this year.
“Banks are tightening lending activities to bring down their ADRs, as per the central bank's directive," said MA Halim Chowdhury, managing director of Pubali Bank.
"Since the deposit growth of banks is now lower than their credit growth, we are sanctioning loans cautiously," Halim explained, adding that this was having a negative impact on credit growth.
According to recent data by BB, the amount of non-performing loans (NPLs) stood at Tk99,370crore, or 11.45% of disbursed loans as of September, 2018.