Credits to corporates rebound after crunch

Funding drought for corporates seems over as private-sector-credit flow marked a double-digit growth, as of November, in a reversal of low ebb amid liquidity crunch and inflationary pressures.
Scourge of inflation on businesses is that entrepreneurs avoid such hard times as the inflation inflates doing-business cost, too, besides firing up consumer prices.
The credit growth in November 2023 over its corresponding period a year earlier was recorded at about 10 per cent, according to Bangladesh Bank data, in an upturn that economists and bankers interpret in their different ways.
In the previous month of October, the credit growth for private- sector players in the national economy was just over 10 per cent.
Officials, bankers and economists, however, see such turnaround in the demand for formal credits by the private entrepreneurs as 'unusual', especially as the development comes ahead of the 12th parliamentary election, set for January 07.
During such election period, commercial banks generally practice cautious or non-aggressive banking operations to avert possible buildup of non-performing loans (NPLs).
Behind the rise in private fund flow, they point out some specific factors, including rescheduling activities on the bad loans by big borrowers ahead of the polls, meeting the annual target of advances to stabilise banks' balance sheets and winter season turnaround when the private-sector-credit demand normally goes on an upturn.
Seeking anonymity, a BB official said the private credit growth increased to about 10 per cent in November even though the liquidity tightness in banks is still in place.
"Fund flow into the private sector normally goes up soon during winter season, with resumption of development activities like real estate and other construction, which could be a reason," the central banker deems.
Normally, many of the big borrowers go for the rescheduling of their bad loans to avert loan-defaulter tag in nomination ahead of national elections, which might be another reason, he adds.
A top executive of a private commercial bank termed the credit rise in the private sector unusual as most of the banks seem to be very cautious in approving loans ahead of the elections when the liquidity in banks is under immense stress.
Managing director and chief executive officer of Dhaka Bank Limited Emranul Huq told the FE writer that every bank has annual target of deposit and advances. As the year was set to end very soon, there might have been some banks which could not fulfill the target yet.
"Many banks started releasing funds to the good borrowers who need money for their business purposes," he said.
The top executive also notes that the dry season has already started and the development works, which remained stuck during the rainy season, will start getting into higher gear now.
When contacted, former lead economist of World Bank's Dhaka office Dr Zahid Hussain said rescheduling principal-plus-interest of some large loans could have caused the slight rise in private-credit growth.
"This time entrepreneurs wait and see as the election is knocking at the door."

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