Private sector credit growth has dipped to a nine-year low in September, which experts blame on slow deposit growth leading to liquidity crisis, high government borrowing, cautious lending and slow import growth.
In the month, the private sector credit growth dropped to 10.66%, the lowest after September 2010, when it was 6.09%, according to the Bangladesh Bank data.
In the first three months (July-September) of the fiscal, the growth remained far below the central bank's curtailed estimation, 14.8%, for the current fiscal year.
Most of the banks were lending cautiously because they were now under pressure to adjust the advance-deposit ratio (ADR) by Sept 30 as per the central bank’s instruction, said Pubali Bank Managing Director MA Halim Chowdhury.
In August this year, the private sector credit growth was at 10.68%, which was 11.26% in July, 11.29% in June, 12.16% in May, 12.07% in April, 12.42% in March, 12.54% in February and 13.20% in January this year.
Policy Research Institute executive director and BRAC Bank Chairman Ahsan H Mansur blames two factors for slowed private sector credit growth.
The first one is liquidity crisis in banks due to a slow deposits growth while the second is increased government borrowing from bank to meet budget deficit.
High amount of non-performing loans was another reason for the slump in private sector credit growth, he said.
The government borrowed nearly Tk280 billion from the country's banking system in more than 100 days of the current fiscal year to meet the budget deficit, partially.
Of the total, the government borrowed Tk256.88 billion from the scheduled banks using treasury bills (T-bills) and bonds, and the remaining Tk19.46 billion from the central bank, according to the central bank data.
According to Association of Bankers, Bangladesh (ABB) Chairman Syed Mahbubur Rahman the private sector credit growth dropped due to slow import growth.
Between July and August, imports stood at $8.62 billion, down by 2.30% year-on-year, according to central bank data.
Non-performing loans continued to rise in the country’s banking sector and because of this, Bangladesh Bank was keeping an eye on the banks to ensure quality of credit, which could be a reason behind the slowdown, as per a BB high official.
Non-performing loans (NPLs) of banks rose by a staggering Tk15.51 billion in three months till June this year, taking the amount of stress loan in the banking sector to Tk1.12 trillion.
As of June, the total bad loans accounted for 11.69% of the total disbursed loans, according to the latest Bangladesh Bank (BB) latest data.