Dhaka, Bangladesh (BBN)– Bangladesh’s overall credit growth in banking system witnessed a rising trend in the recent months because of their higher investment in different sectors, bankers said Monday.
The deposit growth, however, saw a slight fall during the same period due to higher inflationary pressures on the economy, which has squeezed the scope of depositing with the banks.
“The commercial banks may face liquidity problem in the near future, if the existing trend of credit-deposit growth continues with unmanageable assets-liquidity maturity gap,” a senior official of the Bangladesh Bank (BB), the country’s central bank, said.
Credit growth particularly in private sector rose to 17.05 percent or BDT 3,804.54 billion as on April 12 this year from 14.44 percent or BDT 3,625.33 billion on January 5 last.
On the other hand, the bank deposit growth came down to 19.10 percent or BDT 4,635.12 billion from 20.03 percent or BDT 4,427.64 billion, according to the central bank statistics.
“We’re monitoring the credit-deposit ratio (CDR) of banks closely to minimize their assets-liability mismatch,” the central banker said, adding that the credit growth has increased slightly, but remains within the limit.
The central bank earlier set CDR at 85 percent for the conventional banks, while it remains at 90 percent for the Sharia-based Islamic banks.
At least, 15 banks out of a total of 47 have exceeded their CDR limit for credit disbursements as on April 12, the BB data showed.
“Higher inflationary pressure has pushed up the cost of living, squeezing people’s depositing capacity,” a senior official of a leading private commercial bank told BBN while explaining the main reason of declining deposit growth.
Bangladesh’s inflation as measured by consumers’ price index (CPI) eased slightly in April on point-to-point basis mainly because of decrease in prices of both food and non-food items.
The inflation rate came down to 9.93 percent in April from 10.10 percent of the previous month on point-to-point basis, according to the Bangladesh Bureau of Statistics (BBS) data.
On the other hand, the annual average inflation also came down to 10.86 percent in April from 10.92 percent of the previous month.
The private banker also said the credit growth increased slightly during the period under review, as the banks have lent more funds in import of scrap vessel, fertilizer and capital machinery.
“It’s a temporary phenomenon,” he said, adding that the overall credit growth might not increase until June, as the banks are following selective banking instead of mass one in line with the current monetary policy.
Earlier on January 26, the central bank unveiled a ‘restrained’ monetary policy, aiming to bring down inflation to a single-digit by the end of June through discouraging credit flow to unproductive sectors.
BBN/SSR/AD-15May12-10:10 am (BST)