Credit growth slightly rise compare to April
Private sector credit rose by Tk 108,515 crore to Tk10, 00,918 crore in May this year compared to the same month of last year. The credit growth is 12.16%.
However, the credit growth still lies behind the Bangladesh Bank’s credit growth target of 16.50%, set for the second half of the just concluded fiscal year.
"The trend of private credit growth is not satisfactory. The growth cannot rise due to huge liquidity crisis in the country’s banking sector," Ahsan H Mansur, executive director of Policy Research Institute, has said.
The banks have been facing a liquidity crisis, which has forced them to lower lending while the deposit growth in the banking sector is hovering at 10% for long, which in turn weakened the banks' lending capability, he explains.
The central bank had a target of 16.50% growth in the monetary policy for the second half (H2) of this fiscal year (FY).
According to its data, the total outstanding loan in the private sector rose to Tk10,00,918 crore in May this year from Tk8,92,403crore last year. In the last one year, private sector credit rose by Tk1,08,515 crore.
“Individual deposits are being diverted to the government schemes mainly due to higher interest rates on public savings instruments than deposit rates offered by the commercial banks,” said Association of Bankers, Bangladesh (ABB) Chairman Syed Mahbubur Rahman.
He said all banks had put in a strong effort on fund hunting resulting in a surge in interest rates on deposits.
Now the private commercial banks are offering interest rates on term deposits ranging from 6% to 11%.
On the other hand, rates on national savings certificates are between 11% and 12%, according to the central bank data.
Currently, most of the banks are facing liquidity crisis due to high volume of defaulted loans while unsatisfactory recovery is a big reason for the slow credit growth in the private sector, a senior bank official says.
Pubali Bank managing director MA Halim Chowdhury, however, finds private credit growth not bad at all as it is a bit higher than previous month while June’s growth will be even more.
Most of the banks are now under pressure to adjust the loan-deposit ratio as per the central bank’s instruction, he says.
Banks are now disbursing fresh loans in a cautious manner to maintain the ratio, which has ultimately slowed the credit growth.