A significant surge in private-sector credits, particularly in October, nudged the regulators into stocktaking and they spotlighted a splurge from nine banks.
Among the nine generously-lending banks are seven fourth-generation private commercial banks (PCBs), a senior official of the Bangladesh Bank (BB) told the FE.
The growth in credit flow to private sector rose to 18.63 per cent in October 2017, year on year, from 17.80 per cent a month before, according to the central bank's latest statistics.
Such credit growth has already crossed the target set by the BB in its latest monetary policy statement (MPS).
Earlier on July 26 last, the central bank of Bangladesh projected in its first half-yearly (H1) monetary-policy statement for the current fiscal year (FY) 2017-18 that the private-sector credit would grow at 16.2 per cent by December 2017 and 16.3 per cent by June 2018 respectively.
The private-sector-credit growth showed a somewhat overshooting tendency in the recent months, according to the central banker.
"Reviewing bank-wise data of private-sector-credit growth, it has been observed that an increase in credit by the banks contributed to scoring such growth," he explained.
He also said the issue was discussed at BB's board-of-directors meeting held at the central bank headquarters in Dhaka on December 04 with BB Governor Fazle Kabir in the chair.
"The central bank is taking action against the banks after scrutinizing their overall credit activities," another BB official told the FE while replying to a query.
Besides, implementation of different infrastructures along with mega- projects gave a nudge to the overall private-sector-credit growth, they added.
The total outstanding loans with the private sector rose to Tk 8126.80 billion in October last from Tk 8012.25 billion in September 2017. It was Tk 6850.81 billion in October 2016.
Senior bankers, however, said the overall private-sector-credit growth had increased significantly during the period under review due to higher trade financing by the banks.
The overall imports increased nearly 29 per cent to $17.14 billion during the July-October period of the ongoing fiscal year from $13.32 billion in the same period of the previous fiscal, BB data showed.
Explaining the situation on the monetary front, the bankers said lower interest rates on lending and political stability encouraged the entrepreneurs to borrow in a bigger way from local sources to meet their growing demand for funds to invest.
The weighted average interest rates on lending came down to 9.39 per cent in October 2017 from 9.45 per cent a month before. It was up the double-digit mark, at 10.15 per cent, in September 2016.
MA Halim Chowdhury, Managing Director and Chief Executive Officer of Pubali Bank Limited, said higher imports of food-grains alongside capital machinery pushed up the overall private-sector-credit flow in the recent months.
He thinks the uptrend in capital-machinery import may continue in the coming months, too, following remediation and expansion activities in the country's apparel and clothing sector.
"Most of the readymade garment factories are now using modern technology through BMRE (balancing, modernisation, rehabilitation and expansion) as per remediation programme," the senior banker noted.
Implementation of mega-projects, like the Padma Multipurpose Bridge, also contributed to overall higher private-sector-credit growth during the period under review, he explained.
Currently, the government is implementing nine projects under a Fast- Track Project Monitoring Committee, headed by Prime Minister Sheikh Hasina.
Talking to the FE, Syed Mahbubur Rahman, Managing Director and Chief Executive Officer of Dhaka Bank Ltd, said the credit flow to the private sector might continue to grow in the coming months to meet a growing demand for investment particularly in power and infrastructures across the country.
The senior banker also suggested that the banks take effective measures to improve deposit growth for making LC (letter of credit) payments smoothly in the near future.
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