SoCBs\\\' average credit growth turns negative

The average credit growth of the four state-owned commercial banks (SoCBs) has recently entered into negative territory, following lower disbursement of fresh loan to their clients.
Repayment of loan against the Bangladesh Petroleum Corporation (BPC), maintaining a cautious attitude in sanctioning fresh loan, and the ongoing political turmoil are responsible for the SoCBs' negative credit growth, according to senior bankers.  
The Bangladesh Bank's (BB) latest data showed the average credit growth rose to -3.14 per cent as on September 26 from -0.39 per cent as on August 1 last. It was 5.0 per cent in June 30.
"We've already advised all banks, including the SoCBs, to take necessary measures to expedite credit flow to the private sector for achieving maximum economic growth," BB deputy governor S K Sur Chowdhury told the FE Wednesday.
He also said the central bank is ready to provide policy support to the banks on case-to-case basis to raise credit flow to the private sector.  
The SoCBs' amount of loan has dropped significantly after the government repaid the BPC's liabilities amounting to Tk 5.93 billion through issuance of bond.
The Ministry of Finance issued the bond in favour of three SoCBs - Sonali Bank Limited, Janata Bank Limited and Agrani Bank Limited - on June 29. The amount was adjusted with the three SoCBs' accounts from July 2013, a senior BB official said.
The fourth SoCB - Rupali Bank Limited - has, however, maintained a 'healthy' credit growth despite the ongoing political uncertainty centring the upcoming general election.
The central banker also said negative growth does not indicate that there is no new loan disbursement by the SoCBs.
 "Actually the banks have disbursed less fresh loan than their recovery," he explained.
He also said the SoCBs are now actively lending to the country's 'less risky' money market that indicates their 'healthy' liquidity position.
 "It's a good sign for the money market that the banks have turned into lenders from borrowers from early this calendar year," the central banker noted.
The SoCBs have already taken different measures, including strengthening monitoring and supervision, to boost their credit disbursement in line with the BB's advices.
 A senior official of the Sonali Bank Limited told the FE: "All the branches of the bank have been instructed to achieve their respective fresh credit disbursement target along with recovery."
The bank was very cautious in sanctioning fresh loans after the Hall-Mark scam to avert financial risks, he explained.
He also said the top management of the country's largest SoCB is now reviewing performance of the officials, especially the branch managers, on monthly basis.  
"We expect that the credit flow, particularly to the private sector, will increase shortly, if the non-economic obstacles can be removed," a senior official of the Janata Bank Limited said.
He also said most of the entrepreneurs are closely observing the current political scenario.
"They are following a 'go-slow' policy in making fresh investment decisions to avoid financial risks," the banker noted.