Private credit growth decelerated further in August as some banks had to prepare for complying with the central bank's revised advance-deposit ratio rules.
Lower import growth also pushed down the private sector credit growth last month, bankers said.
They, however, expected the credit growth to pick up slightly in September as the central bank had backtracked from its previous decision on slashing the ADR to facilitate the bankers to invest more needed to give the current fiscal's growth a boost.
The sector's credit growth came down to 10.68 per cent in August 2019 on a year-on-year basis from 11.26 per cent a month earlier, according to the Bangladesh Bank's latest statistics.
This growth was 2.52 percentage points lower than the central bank's target of 13.20 per cent for the first half (1H) of fiscal year 2020.
"The credit growth to the private sector may increase slightly in September on the back of the central bank's latest decision [on ADR]," Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh, told the FE on Monday.
On September 17, the central bank announced that the ADR would remain unchanged at 85 per cent for all conventional banks and at 90 per cent for the Shariah-based Islamic banks.
The central bank had earlier re-fixed the ADR at 83.50 per cent and 89 per cent for the conventional banks and the Islamic banks respectively. These rates were scheduled to come into effect from September 30.
Foreign currency loans, availed by some corporate entities, also dragged down the private sector credit growth in local currency, added Mr. Rahman, managing director (MD) and chief executive officer (CEO) of Dhaka Bank Limited.
Talking to the FE, another senior private banker said lower import growth has also driven down the private sector credit growth.
In terms of settlement of letters of credit, the country's import shrank by over 2.0 per cent to US$ 4.57 billion in July of FY' 20, which was $ 4.69 billion during the same period the year before, the central bank data showed.
Meanwhile, outstanding loans with the private sector rose to Tk 10,073.98 billion in August from Tk 9,101.66 billion a year ago. It was Tk 10,029.66 billion in July 2019.
Talking to the FE, a BB senior official said the amount of private sector credit increased, but the growth in percentage terms has decreased in recent months.
"We expect the private sector credit growth to increase in the coming months as the central bank has already taken steps to boost lending," he said.
The measures are intended to achieve 8.20 per cent gross domestic product growth by the end of FY 20, he added.
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