Dhaka, Bangladesh (BBN)- The credit flow to the private sector fell slightly in March 2012 following a declining trend of the country’s overall import payments, bankers said.
The rate of private sector credit growth came down to 19.45 percent in the month of March from 19.55 per cent in February last, according to the central bank statistics.
“Trade financing has decreased significantly in the recent months because of the falling trend in both import orders and actual imports,” a senior official of a commercial bank said.
Opening of letters of credit (LCs) against import, generally known as import orders, dropped by 7.49 percent in April over March 2012, while the settlement of overall LCs, generally known as actual imports, also fell by over 6.0 percent.
The banker also said higher call money rate has also discouraged the banks to lend to the private sector.
Currently, the banks are quoting the call rates ranging between 8.0 per cent and 15 per cent, market operators said.
“The declining trend in private sector credit growth may continue until June as the banks are following selective banking instead of mass one in line with the current monetary policy,” another official of a leading private commercial bank said.
The Bangladesh Bank (BB) unveiled a ‘restrained’ monetary policy on January 26 last aiming to bring down inflation to a single digit by the end of June through discouraging credit flow to unproductive sectors.
The credit flow to the private sector decreased by 19.45 percent to BDT 630.46 billion in March last on a year-on-year basis from BDT 731.02 billion during the corresponding period of the previous year, BB officials said.
“The credit growth to the private sector may decrease further in the coming months as the central bank has used different monetary instruments including increased interest rates on repurchase agreement (repo), reverse repo and withdrawal of interest rate cap in recent months,” a BB official told BBN without elaborating.
Under the revised monetary program, the credit growth rate to the private sector will be limited to 16 percent from 18 percent projected earlier for the current fiscal year (FY 2011-12).
BBN/SSR/AD-11May12-12:50 pm (BST)