Private sector credit growth increased further in January due to higher short-term loans, availed particularly by the corporate entities, for settling their foreign currency liabilities with the banks.
The growth in private sector credit flow rose to 15.61 per cent in January 2017 on a year-on-year basis from 15.55 per cent in December 2016. It was 15.01 per cent in November, according to the central bank's latest statistics, released on Sunday.
"The private sector credit growth increased in January following higher short-term lending, taken mainly by the corporate entities to clear their foreign currency loans with offshore banking units (OBUs) of the banks," a senior official of the Bangladesh Bank (BB) told the FE.
Most of the corporate entities have settled their foreign currency loans with the local ones to avoid exchange loss in near future, the central banker explained.
"The corporate entities were encouraged to avail local currency loans following a depreciating trend of the local currency, Bangladesh Taka (BB), against the US dollar (USD) recently," he noted.
The exchange rate of the local currency depreciated by 28 poisha against the US dollar in the last one month in inter-bank foreign exchange (forex) market, bankers said.
The US dollar was quoted at BDT 79.40 on March 05 against BDT 79.12 on February 01, they added.
Lower interest rates on lending have also encouraged the corporate entities to receive short-term local currency loans, according to the BB official.
Talking to the FE another BB official said the rising trend in private sector credit growth may continue in the coming months, following a gradual momentum in implementation of projects under the annual development programme (ADP).
He also said agriculture loans along with SME financing are also maintaining a rising trend in the recent months that may help to push up the overall private sector credit growth in the near future.
The overall small and medium enterprise (SME) credit disbursement grew by 22.49 per cent in 2016 following strengthened monitoring and supervision by the central bank, officials said.
All banks and non-banking financial institutions (NBFIs) disbursed Tk 1,419.35 billion to 634,574 SME entrepreneurs across the country in 2016, which was 125 per cent higher than the target, fixed at Tk 1,135.03 billion. A total of Tk 1,158.70 billion SME loan was disbursed in 2015.
Echoing the central banker, Managing Director and CEO of Dhaka Bank Ltd Syed Mahbubur Rahman said the private sector credit growth may increase further in the coming months following implementation of different infrastructure projects along with some mega projects in the country. Currently, the government is implementing nine projects under a Fast Track Project Monitoring Committee, headed by Prime Minister Sheikh Hasina.
"The ongoing remediation and expansion activities in the country's apparel and clothing sector have helped to push up the private sector credit growth," the senior banker explained.
The total outstanding loans with the private sector rose to Tk 7,193.53 billion in January from Tk 7,170.19 billion in December 2016. It was nearly Tk 6,222 billion in January 2016.
The central bank projected in its first half-yearly (H1) monetary policy statement for the ongoing fiscal year (FY), 2016-17, that private sector credit would grow at 16.50 per cent in June 2017. In December 2016, private sector credit growth increased slightly after experiencing a falling trend in the previous three consecutive months.
The falling trend in private sector credit growth started in September 2016 that continued until November last. In October 2016, private sector credit growth came down to 15.20 per cent from 15.34 per cent in the previous month, the BB data showed.
siddique.islam@gmail.com
