Private sector credit growth decreased further in April, mainly due to the second wave of the Covid-19 in the country, bankers said.
The growth in credit flow to the private sector came down to 8.29 per cent in April 2021 on a year-on-year basis, from 8.79 per cent a month ago, according to the Bangladesh Bank's (BB) latest statistics.
In February 2021 the growth was 8.93 per cent.
The growth was 6.51 percentage points lower than the central bank's target of 14.80 per cent for the second half (H2) of this fiscal year (FY), 2020-21.
The rising coronavirus infections and deepening uncertainty slashed the private sector credit growth in the last couple of months, according to senior bankers.
They also said lower trade financing also pushed down the credit growth in April 2021.
Bangladesh's overall imports dropped by more than 10 per cent or US$509.03 million in April, mainly due to the Covid-19 pandemic second wave.
Settlement of letters of credit (LCs), generally known as actual import, in terms of value, came down to $4.36 billion in April, from $4.86 billion a month ago, according to the central bank's latest statistics. It was $4.23 billion in February 2021.
On the other hand, opening of LCs, generally known as import orders, fell by nearly 14 per cent or $801.02 million to $5.02 billion in April from $5.82 billion a month before. It was $3.94 billion in February 2021.
The existing lower private sector credit growth may continue until June 2021, the senior bankers predicted.
Talking to the FE, Farman R. Chowdhury, managing director (MD) and chief executive officer (CEO) of Al-Arafah Islami Bank Limited, said the rising trend of coronavirus infections along with uncertainty pushed down the private sector credit growth in April 2021.
"Growing uncertainty due to the ongoing pandemic has decreased the demand for credit in the private sector," another CEO of a leading private commercial bank (PCB) said while explaining the latest trend of private sector demand for credit.
As coronavirus cases continued to rise alarmingly since mid-March, the government imposed a nationwide lockdown for a week from April 5 to curb the coronavirus infections. Later, a stricter lockdown was declared from April 14 to April 21, which was later relaxed and extended until June 16.
Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue (CPD), urged the government to announce a fresh stimulus package worth Tk 300 billion, only for the cottage, micro, small and medium enterprises (CMSMEs), along with the fiscal measures - to bring a positive impact on the country's private sector credit growth in the coming months.
"The scheduled banks as well as non-government organisations (NGOs) and microfinance institutes (MFIs) may act as implementing agencies of the new package for the CMSMEs," Dr Moazzem told the FE.
When contacted, a senior official of the Bangladesh Bank (BB) told the FE that the amount of the private sector credit increased in recent months, but with a falling trend.
"The private sector credit growth will depend on both domestic and global Covid-19 pandemic situations," the central banker said while replying to a query.
He also said imports dropped in April because of lower demand for importable essential items in the domestic market, mainly due to the pandemic. Meanwhile, outstanding loans with the private sector rose to Tk 11,643.31 billion in April from Tk 10,751.71 billion a year ago. It was Tk 10,972.68 billion in June 2020.