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The private sector credit growth hit a fresh nine-year low in September this fiscal year (2019-2020) amid sluggish business activities in the country.
In September, the private sector credit growth dropped to 10.66 per cent, the lowest after September, 2010, when it was 6.09 per cent, according to the Bangladesh Bank data.
In the first three months (July-September) of FY20, the growth rate remained far below the central bank’s curtailed estimation — 14.8 per cent — for the current fiscal year.
The private sector credit growth was 11.26 per cent year-on-year in July and 10.68 per cent in August of the current fiscal year.
The growth rate in August was also the lowest after September, 2013.
Former Bangladesh Bank governor Salehuddin Ahmed told New Age, ‘The constant fall in the private sector credit growth is not a good sign and it could slow down the country’s economy especially the real economic sectors — manufacturing, agriculture and industry.’
Though the government can show on paper higher growth in the other sectors — service, export, import and financial sectors, but those sectors usually do not create real employment, and goods and services, he said.
On paper, there might be growth, he said, ‘I do not think that such growth would be able to bring positive change for the general people.’
About the reason for fall in the private sector credit growth, Salehuddin said, ‘Firstly, the investment-friendly environment is yet to be ensured as there are hindrances to initiating investments.’
Secondly, the government’s high borrowing from the banking sector has been squeezing the banks’ capacity to finance the private sector for investments, he said, adding that the banks preferred giving fund to the government to taking the risk of financing private entities in fear of loan defaulting.
Thirdly, people, who have capacity to invest, have become cautious in making investments due to the ongoing drives against different politically-linked individuals, resulting in a slowdown in overall investments in the country, he said.
On top of that, the government’s policies have remained supportive to the big businesses while banks were not that supportive to the small and medium entrepreneurs, he said.
At the end of September, 2019, the outstanding credit to the private sector increased to Tk 10,16,696 crore from Tk 9,18,745 crore at the end of September, 2018.
Credit to the government from the banking sector increased by 44.4 per cent to Tk 1,66,528 crore at the end of September, 2019.
Complying with the BB’s instruction on advance-deposit ratio was among the other reasons for the fall in private sector credit growth, bank officials said.
They said a fall in import of capital machinery and industrial raw materials in recent months indicated stagnancy in investment in the country.
(NA)
