Private sector credit growth falling amid chaotic politics

The downward trend of private sector credit growth continued until October last due mainly to the ongoing confrontational politics centring ahead of the January 5 parliamentary election, officials said.
The private sector credit growth came down to 11.04 per cent in October last from 11.07 per cent in September, the previous month. The credit growth rate was 20.60 per cent in October, 2012.
"Private sector credit growth has decreased continuously in the recent months following disruption in business activities due mainly to the political turbulence in the recent months," a senior official of the Bangladesh Bank (BB) told the FE Tuesday.
The country's overall business activities came under tremendous pressure in the recent months following frequent spells of blockades and shutdowns, enforced by the opposition parties over formation of the poll-time government.
"We've already advised the commercial banks to expedite credit flow to the private sector for achieving maximum economic growth," the BB official noted.
Earlier on August 25 last, the central bank advised the senior bankers at a meeting to take necessary measures and boost disbursement of credit to the private sector for sustaining the existing economic growth.
Senior bankers, however, feared that the declining trend of private sector credit growth might continue in the months to come, if the political standoff is not resolved immediately.  
"Most of the businessmen are watching the current political situation closely. They are following a 'go-slow' policy on fresh investments to avert any financial risks," a senior official of a leading private commercial bank (PCB) told the FE.
He also said availability of loans from overseas sources with lower interest rates also contributed to the lower growth in private sector credit.
Earlier on November 25 last, the foreign loan and supplier's credit scrutiny committee approved US$ 71.75 million for 12 private companies from overseas sources.
Talking to the FE, a senior official of a leading state-owned commercial bank (SoCBs) said the banks were now facing difficulties with disbursement of credit to even farmers and small and medium enterprises (SMEs) in rural areas as the political violence spread there also. "We're still hopeful about achieving the target of farm credit disbursement by the end of this fiscal year (FY) 2013-14, if the political problem is resolved," he noted.
During the July-October period of the FY 14, the banks achieved 28.25 per cent of their annual agriculture loan disbursement target set at Tk 145.95 billion for the FY 14.
They also said profits of commercial banks might fall by the end of the current calendar year following the lower in private sector credit.