Credit growth in private sector declines further

Siddique Islam The credit growth rate in the private sector declined further in September last as the commercial banks are cautiously disbursing loans, bankers said Saturday. The rate of private sector credit growth came down to 21.98 per cent in September 2011 from 23.19 per cent of the previous month in the current calendar year. It was 24.36 per cent in July last. "We're disbursing loans cautiously for following meticulously the credit-deposit ratio (CDR)," a senior official of a leading private commercial bank told the FE. Bangladesh Bank (BB) has earlier set the safety-limit of CDR at 85 per cent for conventional banks and, for the Sharia-based Islamic banks, it remains at 90 per cent. He also said most of the banks are also following selective banking operations, instead of going for 'mass banking' activities, in line with the BB's latest monetary policy statement (MPS). In its latest half-yearly MPS, the central bank stated that it would aim at containing inflationary pressures through discouraging credit flow to unproductive sectors and for speculative purposes including real estates and investments in stock market, beyond 'affordable' limits. The credit flow to the private sector increased by 21.98 per cent to Tk 631.324 billion in September last on a year-on-year basis from Tk 604.375 billion during the corresponding period of the previous year, the BB data showed. "The private sector credit growth rate may decline further in the coming months as the central bank increased recently its policy interest rates," a BB senior official said. He also said the BB increased its policy interest rates twice during the current fiscal year (FY) aiming to help contain inflationary pressures. "We'll try to achieve the credit growth rate target by the end of June next," another BB official said without giving further details. Under the new monetary programme, credit growth rate to the private sector will be limited to 18 per cent by the end of FY12 from an estimated level of 25.5 per cent in June last.