Dhaka, Bangladesh (BBN) – The private-sector credit growth fell further in March as banks, particularly private ones, faced liquidity pressure due mainly to unavailability of deposits, bankers said.
The growth in credit flow to private sector came down to 12. 42 per cent in March 2019 on a year-on-year basis from 12.54 per cent a month ago, showed the central bank’s data.
This growth was 4.08 percentage points lower than the Bangladesh Bank (BB)’s target of 16.50 per cent for second half (H2) of this fiscal year (FY) 2018-19.
“Most of the banks are now facing liquidity pressure due to unavailability of funds, particularly from individual depositors,” a senior executive of a leading private commercial bank told the BBN in Dhaka.
He said individual deposits are being diverted to government schemes due mainly to higher interest rates on public savings instruments than deposit rates offered by the commercial banks.
Currently, banks are offering interest rates on term deposits ranging between 6.00 per cent and 11 per cent.
However, most of the offered rates were fixed at 9.50-10.50 per cent.
On the other hand, yields on national savings certificates have been fixed between 11 per cent and 12 per cent.
The current trend in the private-sector credit growth may continue in the coming months until liquidity situation improves, according to the private banker.
Talking to the BBN, another private banker said some banks have already squeezed their loan disbursements due to liquidity pressure in the market.
“The demand for fresh liquidity may rise before implementation of the BB’s policy for offshore banking operation of the banks,” the senior banker explained.
As per the policy, issued by the Bangladesh Bank (BB) on February 25, the banks will have to keep 13 per cent of their total liabilities as statutory liquidity ratio (SLR) and 5.50 per cent as cash reserve requirement (CRR) from July 01.
Senior bankers predicated that the rising trend in interest rates on deposit may continue in the coming months to meet the growing demand for fresh funds to comply with the policy for offshore banking operation of the banks, issued by the central bank on February 25 last.
As per the policy, the banks will have to keep 13 per cent of their total liabilities as statutory liquidity ratio (SLR) and 5.50 per cent as cash reserve requirement (CRR) from July 01.
However, the total outstanding loans with the private sector rose to BDT 9,796.86 billion in March 2019 from BDT 8,714.31 billion a year ago.
It was BDT 9,703.49 billion in February 2019.