Dhaka, Bangladesh (BBN)- The growth of private sector credit recorded a significant 24.24 per cent rise in the fiscal 2009-10 (FY10), which has also exceeded the central bank’s target, officials said.
“The higher private sector credit growth indicates restoration of confidence of investors, which suffered in fiscal 2008-09 due to the global meltdown,” a senior official of the Bangladesh Bank (BB) told the Financial Express (FE), a local newspaper,
Credit to the private sector rose by 24.24 percent to BDT 528.33 billion in July-June period of FY10 from 14.62 percent to BDT 277.91 billion of the previous fiscal, according to the central bank statistics.
He also said the recovery of world economy with high prices of essentials, including oil and wheat, in the global market has also contributed to increased flow of credit to the private sector.
The import growth rose 7.11 per cent in FY10 against 5.26 per cent of the previous fiscal, the BB’s data showed.
The central bank of Bank had estimated the private sector credit growth at 21.1 per cent by the end of June this year, according to the monetary policy announced by the BB on July 19 this year.
“The credit flow to private sector increased during the period mainly due to the rise in financing productive sectors like small and medium enterprises (SME), agriculture and trade,” the central bank official added.
On the other hand, a senior official of a leading private commercial bank (PCB) said capital market investment by some banks and non-banking financial institutions (NBFIs) has pushed the overall credit flow to the private sector.
“The banks and NBFIs have invested a substantial amount in the capital market in the last quarters of FY10,” the PCB official said, adding that such investment has also fueled inflationary pressure on the economy.
The overall private sector credit growth has pushed partially the country’s inflation in FY10 although the central bank as well as the government has taken different measures to curb the inflation, bankers and experts said.
The central bank has taken a number of measures to contain inflationary pressure on the economy.
As part of the measures, the BB raised the cash reserve requirement (CRR) by 0.5 percentage points to 5.5 per cent for the commercial banks on May 5 this year for curbing inflationary pressure on the economy.
On August 19 this year, the central bank increased its policy interest rate by 1.0 percentage point aiming to tame inflation.
The interest rate on repurchase agreement (repo) was re-fixed at 5.50 per cent on August 19 from 4.50 per cent while the reverse repo rate was increased to 3.50 per cent from 2.50 per cent.
The government has also taken various steps to keep the prices of commodities stable, and expects the inflation rate to remain below 6.5 per cent this fiscal year.
BBN/SI/AD-02Sept10-11:58 am (BST)
