Pvt sector credit sees steady growth

The credit growth slightly improved to 16.6% in June, the same rate set in the latest monetary policy for December this year from 16.4% in previous month, according to the Bangladesh Bank data. The total loan to the private sector stood at Tk6,69,700 crore at the end of FY’16 compared to Tk5,74,600 crore towards the end of FY’15. The growth trend is expected to remain steady in the coming days turning back from upward trend, said Allah Malik Kazemi, change management advisor to Bangladesh Bank. He explained that as the government borrowing from banking system is still negative, the private sector credit growth will rise in slower pace in the coming months. The banking sector is still awash with excess liquidity due to not having government borrowing and the situation will remain unchanged if the government does not borrow from bank instead of saving instruments. The amount of excess liquidity stood at Tk1,18,000 crore as of June, slightly lower from Tk1,21,000 crore in December last year, according to the central bank data. The private sector credit growth was 13.2% in June of FY’15, far below from the ceiling of 15.5% set in the monetary policy. The credit demand has been rising faster since June of FY’15 taking the credit growth at the pick of 16.6% at the end of FY’16 which was far above the target of 14.8%. Public sector credit growth has always remained volatile registering 3.3% growth in June this year whereas Bangladesh Bank projected 18.7%. Though the private sector credit went beyond the ceiling, Bangladesh Bank is not concerned about it as domestic credit is in the projected level. Domestic credit growth reached 14.3% at the end of FY’16 against the target of 15.5% set in the monetary policy. Growing private sector credit will not put pressure on inflation as domestic credit remains below the ceiling due to negative government borrowing, said Kazemi. “Moreover, price fall of oil and commodity price in the international market favoured us to keep inflation  cool,” he said. On the other hand, lending rate continued to fall even amid growing credit demand. The weighted average lending rate dropped slightly to 10.39% in June from 10.57% in the previous month, according to the central bank data. The deposit rate stood at 5.54% at the end of FY’16.