Dhaka, Bangladesh (BBN) – Credit expansion to the private sector declined further in October due to lower trade financing by the commercial banks, bankers said on Wednesday.

 “Trade financing has been declined in the recent months because of short supply of the US currency in the market,” a senior official of a commercial bank told BBN in Dhaka.

The rate of private sector credit growth came down to 21.46 percent in October 2011 from 21.98 percent of the previous month in the current calendar year, according to the central bank statistics.

The banker lso said most commercial banks disbursed loans cautiously during the period due mainly to adjustment of their credit-deposit ratio (CDR) in line with the directives of the central bank.

The Bangladesh Bank (BB) has already set CDR at 85 percent for conventional banks while in Sharia-based Islamic banks, it remains at 90 per cent as the safe limit.

“The private sector credit growth may decline further in the coming months as the BB has increased its policy interest rates recently,” a BB official said.

The credit flow to the private sector increased by 21.46 percent to BDT 630.63 billion in October last on a year-on-year basis from BDT 624.31 billion during the corresponding period of the previous year, the BB data showed.

Central bank has used different monetary instruments including increased interest rates on repurchase agreement (repo) and reverse repo aiming to contain the current inflationary pressures on the economy, the BB official said.

“The BB will use its monetary tools in line with the existing monetary policy statement (MPS),” he said without elaborating.

In its latest half-yearly MPS, the central bank 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.

BBN/SSR/AD-14Dec11-11:31 am (BST)