Domestic credit flow to private sector increased further as cut-down lending rates roped in corporate entities to borrow more from local banks than overseas sources, bankers said.
Private-sector credits grew to 15.59 per cent in April 2016 on a year-on-year basis from 15.16 per cent in March, according to the central bank's latest statistics. The credit growth was 15.11 per cent in February.
"It may exceed 16 per cent by the end of this month," Biru Pasksha Paul, chief economist of Bangladesh Bank (BB), told the FE Tuesday.
"Largely, the growth is spontaneous and genuine, partially due to excess liquidity in the banking system which was created by government's non-bank borrowing through savings instruments," the chief economist explained.
The growth in credits to private sector has already surpassed the target set by the central bank in its monetary policy for the January-June period of the ongoing fiscal year.
The central bank had projected the private-sector credit growth at 14.8 per cent in June 2016 from 13.8 per cent in December 2015. Â
Echoing the BB chief economist's view, senior bankers said the upturn in private- sector bank borrowing may continue in the months ahead as some banks offer lower interest rates on lending to their clients, particularly corporate ones, to minimise their cost of funds.
"We're now offering interest rates on short-term lending at 7.0 per cent to the corporate clients, aiming to use our excess liquidity," a senior official of a leading private commercial bank (PCB) told the FE.
He also said a section of corporate entities prefer local-currency loan to foreign funds to avoid risk of foreign-exchange volatility.
"A good number of foreign-currency loans have already been converted to local currency to avoid such risk," a senior official of a leading state-owned commercial bank (SoCB) told the FE.
Besides, he added, different types of loans, including commercial, industrial and consumer, have already increased because of declining trend in interest on lending.
The weighted average rates on lending came down to 10.64 per cent in April last from 10.78 per cent in the previous month, the BB data showed. It was 10.91 per cent in February.
The SoCB official also said the private-sector credit growth increased recently following accelerated implementation of different development projects across the country.Â
The total outstanding loans with the private sector rose to Tk 6447.34 billion in April 2016 from Tk 5577.76 billion in the same month of 2015. It was Tk 6364.42 billion in March last.
A BB senior official said the overall excess liquidity with the commercial banks started showing a falling trend recently as the credits increased.
The overall excess liquidity with the commercial banks came down to around Tk 1.05 trillion as of April 7 last from around Tk 1.23 trillion a month ago, according to the central banker.
The BB official expects the amount of excess liquidity to decrease further in the coming months if the rising trend in private-sector credit continued.
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