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The Financial Express

Pandemic slows private sector credit growth further in Feb

| Updated: March 30, 2020 18:04:08


Picture used for illustrative purpose only — Collected Picture used for illustrative purpose only — Collected

Private sector credit growth declined further in the month of February last in view of lower demand for the same.

Bankers have attributed the slackening of demand for credit by the private sector mainly to supply chain disruptions caused by the coronavirus outbreak in different part of the world including China, the main source of procurement of goods for Bangladesh.

The growth in credit flow to private sector came down to 9.13 per cent in February 2020 on a year-on-year basis from 9.20 per cent a month ago, according to the Bangladesh Bank's latest statistics.

This growth was 5.67 percentage points lower than the Bangladesh Bank (BB)'s target of 14.80 per cent for the second half (H2) of fiscal year (FY), 2019-20.

"Lower trade financing by the banks pushed down the private sector credit growth in the month of February," M A Halim Chowdhury, managing director (MD) and chief executive officer (CEO) of Pubali Bank Limited, told the FE on Wednesday while explaining latest situation on the market.

He also said imports have been maintaining a falling trend in the recent months mainly due to coronavirus outbreak.

Bangladesh's import orders dropped by more than 12 per cent, or nearly US$663 million in value terms in January last, due to supply chain disruption caused by the coronavirus outbreak in China.

Opening of letters of credit (LCs), generally known as import orders, came down to $4.63 billion in January from $5.29 billion a month ago, the BB data showed.

Also, the settlement of LCs, generally known as actual import, in terms of value, fell by nearly 9.0 per cent to $4.54 billion in January from $4.98 billion in the previous month.

Bangladesh's foreign trade covering export and import has been hit hard during the past few months by coronavirus pandemic, according to bankers.

Bangladesh imported goods worth $13.64 billion, which include raw materials, machinery and consumer products, from China in FY '19. It was about 25 per cent of total volume of imports in that fiscal.

 "The private sector credit growth might decline further in the coming months for obvious reasons. It is not time to expand business activities," the senior banker said.

Echoing Mr. Chowdhury, Mehmood Husain, MD and CEO of NRB Bank Limited, said the falling trend in private sector credit may continue until May 2020. "There is no sign of improvement right now", he said.

Meanwhile, outstanding loans with the private sector rose to Tk 10,588.99 billion in February from Tk 9,703.49 billion a year ago. It was Tk 10,524.74 billion in January 2020.

Talking to the FE, a BB senior official said the volume of private sector credit increased during the period under review, but the growth, in percentage terms, decreased in recent months.

"We're trying to boost fund flow to small and medium enterprises along with agriculture sectors to keep the domestic demand stable," the central banker said while replying to a query.

siddique.islam@gmail.com

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