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Higher trade financing in Ramadan

Private sector credit growth rebounds

FE Report | Published: July 04, 2019 10:47:47 | Updated: July 06, 2019 12:05:42


Picture used for illustrative purpose

The private sector credit growth bounced back in May, following higher trade financing due to the holy month of Ramadan, after maintaining a falling trend in the previous seven consecutive months, officials said.

The growth in private sector credit flow rose to 12.16 per cent in May 2019 on a year-on-year basis from 12.07 per cent a month ago, according to the central bank's latest statistics.

The growth, however, was 4.34 percentage points lower than the Bangladesh Bank's (BB) target of 16.50 per cent for the second half (H2) of last fiscal year (FY), 2018-19.

The declining trend in the private sector credit growth started in October 2018 that continued until April 2019. In October 2018, the private credit growth was 14.72 per cent.

"We expect that the private sector credit growth will increase slightly in June, as liquidity situation has gradually improved," a senior official of the BB told the FE on Wednesday.

The banks provided higher trade financing to settle import payment obligations in May, particularly for essentials, the central banker explained.

Usually, a large quantity of essential commodities is imported to the country to meet the additional demand of consumers during the month of Ramadan, he added.

The country's actual import in terms of settlement of letters of credit (LCs) rose to US$4.65 billion in May 2019 from $4.57 billion a month before, the BB data showed.

"It's a normal credit growth," M A Halim Chowdhury, managing director (MD) and chief executive officer (CEO) of the Pubali Bank Limited, told the FE.

The senior banker also predicted that the private sector credit growth will rise further in June.

The BB official, however, emphasised proper use of credit for achieving optimum economic growth, saying the quality of credit will have to be ensured to attain the desired GDP (gross domestic product) growth.

"Its quality credit, as we're achieving higher economic growth with moderate private sector credit growth."

The BB official also said the central bank has already taken some measures, including devolvement of the government's borrowed money on its own account to facilitate improving liquidity in the market.

"It will take some time," Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh (ABB), told the FE while replying to a query about the liquidity situation.

Mr. Rahman, also MD and CEO of the Dhaka Bank Limited, said the market liquidity situation is yet to be improved.

On the other hand, the total outstanding loans with the private sector rose to Tk 10,009.18 billion in March 2019 from Tk 8,924.03 billion a year ago. It was Tk 9,879.29 billion in April 2019.

siddique.islam@gmail.com

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