Dhaka, Bangladesh (BBN)- The private sector credit growth increased further in August this year to meet growing demand for essential items in domestic market through imports.

The country’s overall import increased in the month of August due to the holy Ramadan, a senior official of the Bangladesh Bank (BB) told BBN in Dhaka, adding that rising prices of essential items in the global market have also pushed the flow of credit to the private sector.

Credit flow to the private sector recorded a growth of 25.85 percent to BDT 576.22 billion in August 2010 on a year-on-year basis compared to 24.75 percent or BDT 543.34 billion over that of the previous month, according to the central bank statistics.

In July 2010, the private sector credit growth was 24.24 percent.

“Recovering world economy with high prices of essentials including petroleum products, edible oil and wheat in the global market has pushed the credit flow to the private sector,” the BB official said.

Besides, capital market investments by some commercial banks and non-banking financial institutions (NBFIs) have contributed to the overall credit flow to the private sector, the BB official said.

The central bank has already identified 11 private commercial banks (PCBs) that are over-exposed either to stock market or to a single borrower.

These PCBs have been identified since June this year as vulnerable to credit risk for exceeding the permissible limits relating to their investment in stock market or exposure to a single borrower, the BB official conformed.

 “Higher private sector credit growth has partially led to the country’s inflationary pressure due to gestational gap,” the BB official said, adding that the central bank as well as the government has taken different measures to curb inflation.

The country’s overall imports grew by over 42 percent in the first quarter of the current fiscal, thanks to a jump by nearly 229 percent increase in import of food grains, the central bank officials added.

Letters of credit (LCs) against imports worth US$ 6.915 billion were settled during July-September period of fiscal 2010-11 compared to $4.847 billion of the last corresponding period, the BB data showed.

BBN/SI/AD-27Nov10-11:57 am (BST)