Transactions in a state-owned bank is going on at Motijheel, the commercial hub of Bangladesh. BBN file photo
Dhaka, Bangladesh (BBN)- Private sector credit growth in Bangladesh dropped significantly in December because the lower demand for loans, due to the elections, bankers said.
They, however, predicted that the existing growth in credit flow to the private sector may continue till March as preparation for complying with the central bank’s revised advance-deposit ratio (ADR) rules by some banks are now underway.
The private sector credit growth came down to 13.20 per cent in December 2018 on a year-on-year basis from 14.01 per cent a month ago, according to the central bank latest statistics.
This growth was 3.60 percentage points lower than the Bangladesh Bank (BB)’s target of 16.8 per cent for the outgoing first half (H1) of the current fiscal year (FY) 2018-19.
However, the total outstanding loans with the private sector rose to BDT 9,588.41 billion in December 2018 from BDT 8,470.90 billion a year ago. It was BDT 9,427.93 billion in November 2018.
“We expect the private sector credit growth to increase slightly in the coming months because political uncertainty is over after the elections,” a BB senior official told the BBN.
He also said the central bank will give emphasis on ensuring the quality of credit through strengthening its monitoring and supervision.
Talking to the BBN, Mehmood Husain, managing director and chief executive officer (CEO) of NRB Bank Limited, said some banks are maintaining a ‘go-slow’ policy for loan disbursement as they are taking preparations to comply with the BB’s revised ADR rules to be effective by March 2019.
The credit growth to the private sector may maintain a modest growth upto March of this year, the senior banker explained.
Another CEO of a leading PCB expected that the credit growth to the private sector might rebound after March when banks comply with the central bank’s revised ADR rules.
Earlier, the central bank of Bangladesh had extended the deadline by three more months to implement the revised limit of ADR by the banks.
The ADR has been re-fixed at 83.50 per cent for all the conventional banks and at 89 per cent for the Shariah-based Islami banks. The existing ratios are 85 per cent and 90 per cent respectively.
BBN/SSR/AD