Private credit growth slows after five months of upward trend

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Siddique Islam
Credit to private sector slowed down in March after five months of upward trend as demand for lending in the farm sector declined ahead of boro rice harvest, officials said Saturday.
The banks' lending to the private sector including manufacturing, farms, consumers and foreign trade rose to Tk 408.904 billion in the year to March, up from Tk 323.414 billion a year ago.
Although the amount was still 19.45 per cent more than the previous year, it brings an end to the upswing witnessed in the past five months, the BB said. Private sector credit growth in the year to February was 19.56 per cent.
Officials said the marginal slowdown owes largely to lower disbursement of farm credit by the country's 47 commercial and specialised banks.
"Historically, demand for credit has been lower in March than other months. But this year, prices of agri-inputs such as fertiliser were stable, compared to the past," said a BB official.
The banks disbursed Tk 9.68 billion farm credit in March, which was Tk 9.63 billion during the same month last year
Credit growth to key sectors such as manufacturing and foreign trade remained buoyant as exports made a turnaround in March after months of stagnation and contraction.
Central bank officials said credit growth would slow down further in the remaining three months of the fiscal year as they expect the BB's recent anti-inflation steps to take effect.
The BB has ordered credit curbs on land purchase and hiked the cash reserve requirement (CRR) early this month to 5.5 per cent - the amount of money commercial banks must keep in the central bank -- for the first time after October 2005 to mop up excess liquidity from the market.
The aim is to rein in asset price bubble that experts say a possibility and combat inflation that has touched 9.06 per cent in February but came down to 8.78 in March.
"We are confident that the CRR hike will put further brake on to inflationary trend," a senior official of the Bangladesh Bank (BB) told the FE Saturday.
Bankers said the credit growth, however, hides greater malaise in the economy as the lending to new industrial units or expansion of existing ones has yet to see any major increase.
"Project financing is still low due to acute energy crisis. There has been no improvement in power and gas situation over the last one year," said a senior private banker.
"Most of the investors have been observing the situation keenly rather than making fresh investment commitment ahead of the budget," Managing Director of the National Credit and Commerce Bank Limited Nurul Amin told the FE.
"But we hope things will be better in the upcoming fiscal year as already the government has hinted that it would announce new fiscal measures to boost industrial investment," Amin said.