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 credit growth decreased further in August as some banks had to prepare for complying with the central bank’s revised advance-deposit ratio rules.

Lower import growth also pushed down the private sector credit growth last month, according to bankers.

They, however, expected the credit growth to pick up slightly in September as the central bank had backtracked from its previous decision on slashing the ADR to facilitate the bankers to invest more needed to give the current fiscal’s growth a boost.

The sector’s credit growth came down to 10.68 per cent in August 2019 on a year-on-year basis from 11.26 per cent a month earlier, according to the Bangladesh Bank’s latest statistics.

This growth was 2.52 percentage points lower than the central bank’s target of 13.20 per cent for the first half (H1) of fiscal year (FY) 2019-20.

Talking to the BBN, a senior executive of a leading private commercial bank (PCB) said the credit growth to the private sector may increase slightly in September on the back of the central bank’s latest decision on ADR.

On September 17, the BB announced that the ADR would remain unchanged at 85 per cent for all conventional banks and at 90 per cent for the Shariah-based Islamic banks.

The central bank had earlier re-fixed the ADR at 83.50 per cent and 89 per cent for the conventional banks and the Islamic banks respectively. These rates were scheduled to come into effect from September 30.

He also said lower import growth has also driven down the private sector credit growth in the recent months.
In terms of settlement of letters of credit, Bangladesh’s import fell by over 2.0 per cent to US$ 4.57 billion in July of FY’ 20, which was $ 4.69 billion during the same period the year before, the BB’s data showed.

Meanwhile, outstanding loans with the private sector rose to BDT 10,073.98 billion in August from BDT 9,101.66 billion a year ago. It was BDT 10,029.66 billion in July 2019.

“The amount of private sector credit increased, but the growth in percentage terms has decreased in recent months,” a BB senior official told the BBN in Dhaka.

In June this calendar year, the private sector credit growth was 11.29 per cent, which was 12.16 per cent in May, 12.07 per cent in April, 12.42 per cent in March, 12.54 per cent in February and 13.20 per cent in January 2019.

The central banker also expects that the private sector credit growth would increase in the coming months as the BB has already taken steps to boost lending in different sectors.

The measures are intended to achieve 8.20 per cent gross domestic product growth by the end of FY ‘20, the BB official explained.