Dhaka, Bangladesh (BBN)- Private sector credit growth increased further in April as lower interest rates, offered by the banks to attract corporate entities to borrow more from local sources than overseas ones.
The private sector credit growth rose to 15.59 per cent in April 2016 on a year-on-year basis from 15. 16 per cent in March last, according to the central bank latest statistics, released on Tuesday.
The credit growth was 15.11 per cent in February.
Private sector credit growth has already surpassed the target set, by the central bank in its latest monetary policy, for the January-June period of the ongoing fiscal year.
The central bank had projected that the private sector credit would grow at 14.8 per cent in June 2016 from 13.8 per cent in December 2015.
“The rising trend of private sector credit growth may continue in the coming months as some banks offer lower interest rates on lending to their clients, particularly corporate ones to minimise their cost of funds,” a senior official of a leading private commercial bank told BBN in Dhaka.
“We’re now offering interest rates on short-term lending at 7.0 per cent to the corporate clients aiming to use our excess liquidity,” the private banker explained.
He also said a section of corporate entities prefer local currency loan instead of foreign ones to avoid foreign exchange volatility risk.
Besides, different types of loans including commercial, industrial and consumers have already increased as declining trend of interest rates on lending, he added.
The weighted average rates on lending came down to 10.64 per cent in April last from 10.78 per cent in the previous month, the Bangladesh Bank (BB) data showed. It was 10.91 per cent in February.
“The private sector credit growth increased recently following boosting implementation of different development projects across the country,” the banker noted.
The total outstanding loans with the private sector rose to BDT 6447.34 billion in April 2016 from BDT 5577.76 billion in the same month of 2015. It was BDT 6364.42 billion in March last.
“The overall excess liquidity with the commercial banks has started a falling trend recently as the credits increased,” a BB senior official told BBN in Dhaka.
The overall excess liquidity with the commercial banks came down to around BDT 1.05 trillion as of April 7 last from around BDT 1.23 trillion a month ago, according to the central banker.
BBN/SSR/AD