Bank credit to private sector drops marginally in March

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Siddique Islam
The private sector credit growth dropped, marginally, to 18.18 per cent in March, which was below the central bank's target. The main reason for the decline is attributed to the businessmen's cautious attitude towards making new investments in the backdrop of global economic recession.
The Bangladesh Bank (BB) had set the private sector credit growth at 18.50 per cent by the end of June this year, according to the latest monetary policy, announced by the central bank on January 14 last.
The private sector credit growth came down to 18.18 per cent in March from 19.84 in February this year, according to the central bank statistics.
The credit flow to the private sector has declined in the last six months because of a 'go-slow' policy adopted by the businessmen to avoid any financial risk against the global economic recession, the BB officials said.
The credit flow to the private sector has been on the decline since October last year. The growth came down to 24.72 per cent in October from 26.55 per cent in September 2008.
"The investors are very cautious to invest their fresh funds in different sectors. They like
to see what are coming in the next budget," Managing Director and Chief Executive Officer of the Agrani Bank Limited Syed Abu Naser Bukhtear Ahmed told the FE Monday.
"We did not see initiation of any large project during January-March period of this year, indicating lower credit flow to the private sector," Mr. Bukhtear said while explaining the latest credit flow situation to the private sector.
"The credit flow to the private sector may pick up from the next fiscal," Association of Bankers Bangladesh (ABB) Chairman K Mahmood Sattar told the FE, adding that the lowering of interest rates on lending would help increase borrowing by the private sector.
The central bank has capped interest rates on import financing for nine essential food items to a maximum of 12 per cent. This would help increase the credit flow to the private sector through boosting of import of the essentials.
"We expect that the credit flow to the private sector will increase from the beginning of the next fiscal year," Managing Director of the National Credit and Commerce Bank Limited (NCCBL) Nurul Amin told the FE.
He also said overall credit flow to the private sector will dependent on the measures to be taken in the next budget.
Most investors are waiting for the new budget, which might offer some changes in tax structure to facilitate the country's overall business activities, the bankers said.
The credit flow to the private sector declined by 18.18 per cent to Tk 323.41 billion in March last on a year-on-year basis from 21.16 per cent or Tk 310.61 billion of the corresponding period of the previous year, the BB's data showed.
"We expect that the private sector credit growth may finally reach within the target by the end of this fiscal 2008-09 to meet the demand for fresh loans to the country's business community," another BB official said.