Credit growth up as lending rates go down

The overall growth in credits from the country's banking system took an upturn, as of the last week of July, as banks lowered a little their interest rates on loans, bankers said Tuesday.
As of July 24 last, the overall credit growth rose to 11.74 per cent from 10.15 per cent that was on June 30, 2014.
On the other hand, deposits with the banks also increased, despite the fact of interest cuts.
The growth in bank deposits stood at 16.13 per cent from 15.81 per cent, according to the central bank statistics.
"The rising trend in credit growth may continue in the coming months if the declining trend of interest rates on lending, particularly for corporate entities, continues," a senior official of a private commercial bank (PCB) told the FE.
Most of the banks are now offering lower lending rates to the well-performing corporate entities for expediting their overall business activities, the private banker explained.
The interest rates on credits only for the corporate entities came down to around 11 per cent recently from 15 per cent early this calendar year, the PCB official mentioned.
However, after all this, the investment situation didn't yet show a sign of satisfactory improvements.            
"Actually, the investment situation is yet to improve at satisfactory level even after eight months of the national elections, held on January 5," the banker said.
Besides, operations of new nine banks have intensified the competition among the banks in attracting new clients.
 "The situation is getting aggravated further due mainly to early payoffs of loans by relatively good corporate clients through availing low-cost loans from other peer banks," the private banker observed.
The credit-deposit ratio (CDR) of all the banks came down to 70.42 per cent, as of July 24 last, from 70.45 per cent as of June 30, 2014.
Higher deposit growth than that of credits influenced the credit-deposit balance.
The central bank earlier set the safe limit of CDR at 85 per cent for conventional banks and at 90 per cent for Sharia-based Islamic banks.
Talking to the FE, a senior official of the Bangladesh Bank (BB) said the central bank advised the banks to take necessary measures for boosting disbursement of credits to the private sector in line with the current Monetary Policy Statement (MPS).
The central bank has set the private-sector credit-growth target at 16.5 per cent for the July-December period of the current fiscal year (FY) 2014-15.
The central banker also said there was a scope to increase the credit flows further to different areas, including the small and medium enterprises (SME) and agriculture sectors.

jahangir_fe@yahoo.com