The private sector credit growth rate increased slightly in May from that of the previous month, but the rate still remained low as the businesspeople maintained their ‘wait-and-see’ approach to business expansion amid political uncertainty.
According to the Bangladesh Bank data released on Wednesday, the year-on-year credit growth rate in the private sector stood at 13.57 per cent in May compared with that of 13.27 per cent in April.
BB officials said although the rate rose slightly in May, it still remained well below the target of 15.50 per cent to be achieved by June as per the monetary policy statement.
The credit flow to the private sector stood at Tk 5,61,863.40 crore as of May 2015 against Tk 4,94,720.50 crore as of May 2014. It was Tk 5,57,775.90 crore as of April 2015 against Tk 4,92,409.80 crore as of April 2014, the BB data showed.
Policy Research Institute executive director Ahsan H Mansur told New Age on Wednesday that the private sector credit growth had picked up slowly and it would inch up more in the months to come.
But, the credit growth will not increase in accordance with the country’s business volume as the investment scenario has not changed much, he said.
‘The country’s ideal credit growth is between 17 per cent and 18 per cent. But, it is not possible to achieve the growth right now due to the ongoing sluggish investment environment,’ he said.
Mansur said the large borrowers were now facing crisis and that was another cause of the lower private sector credit growth.
Some of the large borrowers are now facing over debt-burden while a significant number of them have already entered into the defaulting zone, he said.
A BB official said increase in the private sector credit growth would face hurdle in the coming months if the existing political uncertainty prevails.
The businesspeople had taken a plan to expand their business before January 2015 considering an eased political situation in the period, he said.
But, the BNP-led alliance enforced a non-stop blockade supplemented by frequent general strikes between January and April of this year.
Against the backdrop, the businessmen again adopted a go-slow policy to expansion of their industrial units that ultimately put an adverse impact on the country’s private sector, the central banker said.
The private sector credit growth stood at 13.27 per cent in April, 13.63 per cent in March, 13.61 per cent in February, 13.33 per cent in January, 13.50 per cent in December, 12.67 per cent in November, 12.12 per cent in October, 12.15 per cent in September, 11.39 per cent in August and 11.25 per cent in July of the last financial year.
Due to the political uncertainty, the BB had failed to achieve its private sector credit growth target of 14 per cent in line with its monetary policy for the July-December period of 2014.
The central bank kept unchanged the private sector credit growth of 15.50 per cent in the second half of the FY15 in its latest monetary policy statement due to the recent spate of political violence, the BB official said.
The central bank will fail again to achieve the private sector credit growth target in the second half of the FY15 due to a sluggish business trend, he said.
A good number of businessmen earlier became loan defaulters because of the sluggish business amid the political unrest and eventually it became difficult for them to get more loans from banks, he said.
‘Ensuring vibrant political environment is highly important to achieve goal in the private sector credit growth,’ the official said.
The BB data showed that the year-on-year credit growth in the overall domestic sector increased to 10.29 per cent in May from 9.76 per cent in April, 2015.
The total credit in the domestic sector stood at Tk 6,84,438 crore as of May 2015 against Tk 6,20,581.30 crore as of May 2014. It was Tk 6,79,168.80 crore as of April 2015 against Tk 6,18,748.30 crore as of April of 2014.
Source: New Age
