Private-sector credit flows ebbed down with economic activity hitting the rock bottom amid the August mass uprising that led to the fall of Sheikh Hasina regime, officials said.
Under domino effect of the political unrest, the country's overall economic activities remained almost at a standstill during most parts of that month. As part of the private-sector entrepreneurs' cautious business approach following the regime change, they more or less halted their business- expansion plan to avert any further investment woes.
Apart from the chaos associated with the changeover in state power, the latest event of flooding that inundated major parts of the country's southeastern regions also forced the private-sector players to be watchful before putting in any further capital investment. And it is clearly reflected in the data of credit flow to the private sector from the banking channel.
The growth in credits to the private sector came down to 9.86 per cent in August 2024 on a year-on-year basis from 10.13 per cent a month ago, according to the central bank's latest statistics. It was 0.06-percentage-point higher than the Bangladesh Bank (BB) target of 9.80 per cent for the first half (H1) of the current fiscal year (FY) 2024-25.
"The existing trend of private-sector growth may continue in the coming months with the continuation of existing contractionary monetary- policy stance to contain inflationary pressure on the economy," a senior official of the Bangladesh Bank told the FE in reply to a query.
Some challenges, such as persistent high inflation, gas and power crises, corruption, dollar shortages and a sharp depreciation of the taka have also been responsible for lower private -sector credit growth, the central banker explains.
"Businessmen have maintained a 'wait-and-see' policy for making fresh investment in different sectors," Syed Mahbubur Rahman, Managing Director (MD) and chief executive officer (CEO) of Mutual Trust Bank, told the FE while explaining the latest business environment of Bangladesh.
The experienced banker also said trade finance along with general investment decreased following lower import expenses as well rising trend of inflation in recent months.
Bangladesh's opening of letters of credit (LCs) fell 12.96 per cent to $10.02 billion during the July-August period of FY '25 from $11.51 billion in the same period of the previous fiscal year.
On the other hand, actual imports -measured by the settlement of LCs -dropped 13.08 per cent to $10.34 billion during the period under review from $11.90 billion in the same period of FY '24.
Former director general of the Bangladesh Institute of Bank Management (BIBM) Dr Toufic Ahmed Choudhury said boards of the commercial banks became very careful about approving risky loan proposals after the regime shift.
In case of loan approval, the economist said, the members of the boards try to follow prudent due diligence to avert any possible buildup of non-performing assets.
"This is one of the factors contributing to the drop in the credit flow to the private sector," he added.
Meanwhile, outstanding loans with the private sector rose to Tk 16427.03 billion in August from Tk 16359.16 billion a month before.It was Tk 14952.57 billion in August 2023.
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