The private sector credit growth marked continuous drop in every quarter of the past fiscal year as the political instability loomed large with the election nearing.
Bangladesh Bank data showed the private sector credit grew 19.3% in the first quarter compared to the same period a year earlier.
The second quarter marked 16.2% growth while the third quarter 13.4% and the fourth quarter 11.1% from the respective periods of the previous fiscal.
The situation in the fiscal year 2011-2012 was much better with the growths of 22.3%, 19.7%, 18.8% and 20% in four quarters consecutively.
For the first half of the current fiscal, Bangladesh Bank has set a private sector credit growth target at 15.5% from the same period of FY2013 as no possibility of easing political squabbling is seen before general elections by early next year.
Besides, lower interest rates of loans from foreign sources is also discouraging the investors to take credit from the local banks, said a Bangladesh Bank official.
Loans from foreign sources are now available at 4.5-5% interest rates.
The central bank approved Tk280bn foreign loans from 2010 to October 2013.
However, despite the fact, the central bank expects the credit growth situation get better in the months to come as “steps are being taken in this regard.”
Recently, IMF expressed its concern over the poor demand of private sector credit, which suggests a possible slowdown in economic growth.
In this backdrop, Bangladesh Bank advised the banks to focus on SME and agriculture loans in a bid to reduce impact.
Bangladesh Bank data showed the private sector credit performed well in fiscal year 2010 and 2011 as the growth registered 23.9% and 24.7% respectively.
