Private sector credit growth hit 6-year low in June this year amid rising liquidity crisis in the country’s banking sector due to soaring non-performing loans and poor deposit growth.
As per the latest Bangladesh Bank data, the private sector credit growth slumped to 11.29 per cent in June, well below the BB target to reach 16.5 per cent credit growth by the month.
The growth rate in June was the lowest since June, 2013 when it was 11.04 per cent.
Private sector credit growth was 12.42 per cent, 12.54 per cent and 12.16 per cent in March, April and May this year respectively.
The public sector credit growth, however, soared to 19.15 per cent in June, against the BB monetary policy target of 10.9.
BB officials said that the banks squeezed loan disbursement to private sector as they were failing to recover defaulted loans and collecting deposit.
They said that the government’s heavy borrowing from banking sector in June, the last month of the previous financial year 2018-2019, to complete its annual development programme also affected loan disbursement to private sector.
The defaulted loans in the banking sector soared to Tk 1.11 lakh crore by the end of March, 2019 rising by more than Tk 16,900 crore in three months as banks failed to reign in errant borrowers.
Besides, the country’s private sector also became stagnant with lack of appetite for fresh credit, they said.
Experts expressed their concern regarding the slow private sector credit growth as it might affect the country’s economic growth.
The Bangladesh Bank should have a closer look for understanding the reason for slow credit disbursement to the private sector, they said, adding that the central bank should take measures to get rid of the situation.
The BB statistics showed that the private sector credit increased to Tk 10,09,988 crore at the end of June from Tk 9,07,531 crore at the end of June last year.
Bankers and BB officials said that the liquidity crisis in the country’s banking sector also worsened as depositors heavily bought national savings certificates because of higher interest rate.
Source: New Age.
