Private sector credit growth declined further to 9.75% in August in Bangladesh amid liquidity crisis, reduced lending capacity of banks and persistent economic challenges.
The growth in August was the lowest after that in October 2021 when it was at 9.44%.
As per Bangladesh Bank data, private sector credit growth reached to the current level from 9.82% in July and that of 10.57% in June.
In August, banks disbursed Tk1,495,000 crore to the private sector.
According to the central bank data, the amount of excess cash liquidity in banks dropped to Tk11,000 crore in July.
Additionally, the rise in distressed assets within banks has eroded their capacity for loan disbursements, with the total distressed assets in the country’s banking sector reaching Tk377,922 crore as of December 2022.
Moreover, the value of defaulted loans embroiled in legal proceedings surged to Tk207,361 crore, while non-performing loans have climbed to Tk156,039 crore as of June 2023.
Furthermore, the country’s economy has grappled with a series of challenges in recent months, including high inflation, foreign exchange volatility, a dearth of dollars and an energy crisis.
The government and the Bangladesh Bank have intensified monitoring and imposed restrictions on imports, which has curtailed business operations, consequently reducing the demand for credit.
The BB sold over $23 billion in the past 26 months to banks to address the dollar shortage in the financial sector.
The exchange rate rose sharply to Tk110.5 from Tk90 against the US dollar within a year.
The private sector credit growth was 8.35% in FY21, 13.66% in FY22 and 10.57% in FY23.
