Dhaka, Bangladesh (BBN) – Credit flow to the private sector declined further in November 2011 due mainly to selective banking instead of aggressive ones by the commercial banks.

The rate of private sector credit growth came down to 19.33 percent in November last from 21.46 percent of the previous month in the last calendar year, according to the central bank statistics.

“The private sector credit growth may decrease further in the coming months as the central bank has increased its policy interest rates recently,” a senior official of the Bangladesh Bank (BB) told the BBN in Dhaka.

The credit flow to the private sector increased by 19.33 percent to BDT 586.197 billion in November last on a year-on-year basis from BDT 658.938 billion during the corresponding period of the previous year, the BB data showed.

The central bank official also said the central bank increased its policy interest rates twice during the current fiscal year aiming to curb inflationary pressure on the economy.

 “We’ve used different monetary instruments including increased interest rates on repurchase agreement (repo) and reverse repo, aiming to help contain the current inflationary pressures,” the central banker noted.

On the other hand, senior officials of commercial banks said they are now following selective banking instead of aggressive ones in line with the existing monetary policy statement (MPS) of central bank.

In its latest half-yearly MPS, the Bangladesh Bank (BB) stated that it would aim at containing inflationary pressures through discouraging credit flow to unproductive sectors and for speculative purposes including real estates and investments in stock market, beyond affordable limits.

Under the new monetary program, credit growth rate to the private sector will be limited to 18 per cent by the end of fiscal year (FY) 2011-12 (FY12) from an estimated level of 25.5 per cent in June last.

“Most private commercial banks are now discouraging investments in less productive sectors including consumers’ credit,” a senior official of a leading private commercial bank said.

 He also said trade financing has also been declined in the recent months because of short supply of the US currency in the market.

The local currency has been under pressure, leading to its depreciation recently against the US dollar mainly due to higher demand for the greenback for settlement of outstanding letters of credit (LCs) for import.

BBN/SSR/AD-12Jan12-9:36 am (BST)