Domestic credit growth falls by 3.0 per cent

FE Team | Published: July 06, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

FE Report
The country's overall domestic credit growth fell by about 3.0 percentage points during the first 10 months of fiscal 2006-07 compared with that of the same period of the previous fiscal due mainly to political uncertainty.
Overall domestic credit growth dropped to 10.85 per cent to Tk 192.93 billion in the July-April period of fiscal 2006-07 from 13.84 per cent or Tk 290.57 billion of the corresponding period of the previous fiscal.
"The credit flow to the state-owned enterprises (SoEs) dropped sharply during the period leading to the fall of overall domestic credit growth," a senior official of the Bangladesh Bank (BB) told the FE Thursday.
He also said the credit to the private sector declined slightly in the period due to political uncertainty.
"There is a little scope for increasing credit flow in the near future as the central bank will continue to maintain its cautious monetary policy for another six-month," the official noted.
On June 12 last, BB Governor Salehuddin Ahmed asked the commercial banks to raise the credit flow, particularly in the thrust sectors, for achieving seven per cent growth of gross domestic product (GDP) in fiscal 2007-08.
The Ministry of Finance forecasts a 7.0 per cent GDP growth for fiscal 2007-08.
On the other hand, the bankers came up with different views, saying that such a fall in the credit flow will have a long-term impact on the economy because it will hamper the real sector growth as well as employment.
"If the credit flow falls, employment will be affected that will in turn hamper the growth in the real sector," a chief executive officer of private commercial bank told the FE.
The credit growth to the private sector declined by 2.48 percentage points in the same period because of the political uncertainty, lack of utility services and cautious monetary policy of the central bank, sources in the banking sector said.
According to the central bank statistics, the private sector credit growth fell to 11.72 per cent in the period from 14.20 per cent in the same period of the previous fiscal.
During the period, the credit to the private sector dropped to Tk 153.47 billion from Tk 157.24 billion.
However, the growth of credit to the SoEs sharply fell to 9.35 per cent during the period from 38.87 per cent in the same period of the previous fiscal.
According to the statistics, the overall SoEs credit came down to Tk 14.12 billion in the same period from Tk 43.39 billion corresponding period of the previous fiscal.