Consumers' credit, card use rise significantly

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Siddique Islam
The central bank will ask the commercial banks to discourage flow of fresh credit into unproductive sectors aiming to achieve maximum economic growth and curb inflation.
The instruction will be given during a bankers' meeting scheduled for Sunday at the central bank Sunday with Bangladesh Bank (BB) Governor Salehuddin Ahmed in the chair.
The BB's move will come against the backdrop of rising credit flow to unproductive sectors, mostly through offering credit cards and consumer financing over the last one year, officials said.
The growth in credit for buying goods using credit cards rose significantly by 121.05 per cent in June last over the corresponding period of the previous year while credit for purchasing consumer goods increased by 93.30 per cent, according to the central bank statistics.
During the period, marriage loan went up by 60.73 per cent compared with that of the same period of the previous year while flat purchase loan increased by 44.12 per cent, the BB's data showed.
"We will ask the banks to provide loans to the productive sectors from their own deposits rather than borrowing from the money market," a BB senior official told the FE Thursday.
He also said the banks will have to raise their deposit growth to meet the increasing demand for credit.
Credit growth to the private sector stood at 26.96 per cent as on August 14 last while deposit growth in the country's banking system reached 17.72 per cent, the data showed.
"We will advise the banks to gear up loan disbursement in productive sectors, including agriculture for achieving maximum economic growth by the end of this fiscal," another BB official noted.
On 17 July last, the BB declared its monetary policy for the first half of fiscal 2008-09, which showed the real gross domestic product (GDP) target at 6.5 per cent and an average inflation rate at around 9.0 per cent in the current fiscal.
Meanwhile, the country's inflation as measured by the Consumers Price Index (CPI) rose to 10.01 per cent in August last on annual average basis from 10 per cent in the previous month.
On the other hand, the inflation rate slightly eased to 10.11 per cent on a point-to-point basis in August from 11.82 per cent in July last.
The central bank earlier asked the commercial banks to increase investment in the productive sectors, particularly agriculture, small and medium enterprises (SMEs), construction, infrastructure, and other rural activities, for recouping the losses caused by floods and cyclone.