Transactions in a state-owned bank is going on at Motijheel, the commercial hub of Bangladesh. BBN file photo
Dhaka, Bangladesh (BBN)- Bangladesh’s private sector credit growth fell slightly in September further mainly due to lower demand for loans ahead of the national elections, bankers said.
Most of the banks are also maintaining a ‘go-slow’ policy for loan disbursement as they will have to comply with the central bank’s revised advance-deposit ratio (ADR) rules to be effective by March 2019, they added.
Earlier, the central bank had extended the deadline by three more months to implement the revised limit of ADR by the banks.
Under the extended timeframe, the banks having ADR above re-fixed limit are allowed to implement the revised limit of ADR by March 31, 2019 instead of December 31, 2018 earlier.
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.
The private sector credit growth came down to 14.67 per cent in September 2018 on a year-on-year basis from 14.95 per cent a month ago, according to the Bangladesh Bank (BB)’s latest statistics.
The private sector credit growth was 15.87 per cent in July 2018.
This growth was more than 2.0 percentage points lower than the BB’s target of 16.8 per cent for the first half (H1) of the ongoing fiscal year.
Talking to the BBN, senior bankers said some clients have also maintained a ‘wait-and-see’ policy for receiving fresh credit ahead of the next elections.
The banks having ADR above the re-fixed limit are now following a conservative approach towards disbursing fresh credit to comply with the revised ADR rules, they explained.
“The credit growth to the private sector may rebound from March 2019 after the formation of a new government,” a chief executive official of a leading private commercial bank (PCB) predicted.
“It’s a seasonal impact. It will pick up again after the elections,” a BB senior official said
He also added that though the amount of private sector credit increased, it is on a decreasing trend in recent months.
The total outstanding loans with the private sector rose to BDT 9,187.45 billion in September 2018 from BDT 8,012.25 billion a year ago. It was BDT 9,101.66 billion in August 2018.
However, economists and experts said both the supply and demand sides were liable for the slowdown.
The supply side, meaning the lenders, are fearful of disbursing loans to contractors particularly dedicated towards implement mega infrastructure projects as the latter may lose work contracts if there is a change in government through the election, they added.
Private sector credit growth slowed a bit in 2017's first quarter and then rose till November, reaching 19.06 percent. But it steeply descended from March to September this year for the escalating political tension, the BB data showed.
BBN/SSR/AD