Dhaka, Bangladesh (BBN) - Private sector credit growth decreased further in June last slightly due mainly to a sluggish investment trend ahead of the next general elections and availability of overseas loans at lower interest rates, officials said.
The rate of private sector credit growth decelerated to 11.04 per cent or BDT 450.235 billion in June 2013 from that of 11.43 per cent or BDT 455.590 billion in May last. The rate was 19.72 per cent or BDT 671.889 billion in June 2012.
“We’ve already advised the commercial banks to expedite credit flow to the private sector for achieving maximum economic growth,” a senior official at the Bangladesh Bank (BB) said.
Earlier, on August 25 last, the BB advised the senior bankers at a meeting to take necessary measures to boost disbursement of credit flow to the private sector for sustaining the existing economic growth.
The central banker said the BB was now working on the issue aiming to increase the credit flow to the private sector in line with the ongoing monetary policy statement (MPS).
The BB has set private sector credit growth target at 15.5 per cent for the July-December period of the current fiscal year (FY) 2013-14.
The bankers, however, expected that the private sector credit growth would increase gradually in the coming months as they were taking preparations to achieve the credit growth target set by the BB.
“We’ve taken initiatives to expedite credit flow to small and medium enterprises (SMEs) and agricultural sector, along with corporate entities, to achieve the credit growth target by the end of December this year,” a chief executive of a leading private commercial bank told BBN in Dhaka.
“Private sector credit growth in FY `13 slowed in the second half of the year although borrowing by corporate entities overseas partly made up for this,” the central bank said in its current MPS.
In addition to access to credit from domestic sources, Bangladeshi corporate entities now also can tap foreign sources of financing, it added.
“This slowdown is partly due to sluggish investment demand in the lead-up to the national elections, tighter lending practices by banks as well as the fact that there are two new channels through which entrepreneurs can access overseas lenders,” the MPS noted.
One existing channel is borrowing by corporate entities for term-credit purposes with most having a maturity beyond five years – around US$ 1.48 billion was approved in FY `13 compared with $1.0 billion in FY `12, according to the MPS.
It also said that in addition private capital flows to local corporate entities have also grown due to the addition of short-term foreign currency loans for working capital purposes.
These newly introduced facilities in the form of ‘buyers’ credit’ which importers can avail with a tenure of up to one year and ‘discounted export bills’ have led to a $784 million inflow between July-May of FY `13.
The addition of external borrowing to the domestic one implies that total private sector credit growth for May 2013 was 13.6 per cent, the MPS said.
BBN/SSR/AD-01Sept13-8:37 pm (BST)
