Credit flow into private sector grows gradually as July demand for loans, particularly for working capital, rose for Eid-ul-Azha festival and the after-lockdown reopening of businesses began creating needs for funds.
Such credit flow rose to 8.38 per cent in July 2021 on a year-on-year basis, from 8.35 per cent a month ago, according to the central bank's latest statistics.
The growth was 7.55 per cent in May 2021. It was 2.62 percentage points lower than the Bangladesh Bank (BB)'s target of 11 per cent for the first half (H1) of fiscal year (FY) 2021-22.
The ongoing Covid-19 pandemic along with deepening uncertainties had pushed down the credit growth in the past couple of months, according to the bankers.
But the private-sector credit growth returned to an upturn in June 2021 after maintaining a falling trend in three consecutive months, the BB's data show.
The bankers, however, say some banks have provided short-term loans to the corporate entities offering lower interest rates to meet their working-capital requirements.
Besides, relaxation of lockdown ahead of the Eid-ul-Azha had helped increase the demand for loans, particularly trade finance, they explained.
Earlier, the government had relaxed restrictions on movement for a week from July 15 midnight to facilitate economic activity centering Eid-ul-Azha fiesta.
"We're expecting some growth in the private-sector credits in the coming months," said Syed Mahbubur Rahman, former chairman of the Association of Bankers, Bangladesh, while explaining this trend.
Mr Rahman, also managing director (MD) and chief executive officer (CEO) of Mutual Trust Bank Limited, said starting implementation of the second phase of stimulus packages would help increase the private credit growth.
All the scheduled banks have already been asked to implement the second phase of two major stimulus packages amounting to Tk 600 billion to help revamp the coronavirus-hit economy.
Implementation process of the second phase of the stimulus packages worth Tk 400 billion for large industries and service-sector business entities has been started with the inclusion of foreign-owned companies operating in Bangladesh.
Besides, the stimulus package for the cottage, micro, small and medium enterprises (CMSMEs) worth Tk 200 billion has already entered into its second phase through amending the target-fixation method.
Talking to the FE, a BB senior official said the demand for credit would increase in the coming months following the reopening of the country's overall economic activities gradually.
"We expect that the private-sector credit growth will cross double-digit level by the end of this calendar year if the improving trend in the Covid situation continues," the central banker predicted.
Meanwhile, outstanding loans with the private sector rose to Tk 11,870.11 billion in July from Tk 10,952.02 billion a year ago.
It was Tk 11,888.55 billion in June 2021.
siddique.islam@gmaial.com