Bangladesh
6 years ago

Banking sector growth likely to decline in FY ’18

Experts blame scams, unsavoury developments for the setback

Published :

Updated :

A number of scams along with troubles of varying nature have hit the growth of the country's banking sector, as its expansion rate is likely to drop by 1.32 percentage points in the current fiscal year (FY), according to official data.

The provisional data of the Bangladesh Bureau of Statistics (BBS) showed that the growth rate of the country's financial intermediation is set to drop to 7.90 per cent in FY 2017-18 from that of 9.12 per cent in last fiscal.

Economists said the recent banking sector scams and several setbacks have severely affected the growth of the country's financial sector, a key auxiliary to investment and employment as well as to gross domestic product (GDP) growth.

They have raised questions over the high economic growth rate as estimated by the BBS amid unpalatable developments in the financial sector.

According to the BBS provisional data, the growth rate of 'monetary intermediation (banks)' sub-sector has dropped the highest of 1.44 percentage points to 8.51 per cent in the current FY from that of 9.95 per cent in FY 17.

The growth rate of the 'insurance' sub-sector has also dropped 0.42 percentage points to 1.63 per cent in the FY under review, and 0.01 percentage points to 9.05 per cent in 'other financial auxiliaries' sub-sector compared to the previous FY.

Meanwhile, the growth of the country's financial sector has declined to a single-digit over the last five years compared to its impressive double-digit growth in FY 11 and FY 12 following several scams and troubles in banking sector.

In FY 18, the growth of financial intermediation has dropped further to 7.90 per cent.

The country's financial sector, especially the banks, are going through hard times, as they are burdened with the largest ever amount of non-performing loans (NPL), low net profit, high provisioning requirement, theft at the central bank's reserve, and liquidity crunch etc.

NPL in the banks reached to Tk 743.03 billion in the calendar year 2017 from that of Tk 621.72 billion in 2016, the central bank data showed.

Lead economist of the World Bank Dhaka office Dr Zahid Hussain told the FE that scams and troubles have affected the expected growth of the banking sector in the current fiscal.

"It is quite puzzling that despite decline in the financial sector's growth and stagnancy in private sector investment, the country's GDP is set to record a 7.65 per cent growth".

"Besides, how can the higher economic growth be claimed when percentage of NPL is high and financial sector's growth remains low?"

If the financial sector continues to face such difficulties, future of the national economy will remain at stake, he cautioned.

Professor of Economics at Dhaka University Dr Selim Raihan said high NPL, liquidity crunch, provisioning of classified loans as well as banking scams and troubles have already hit the financial sector, which is reflected in the BBS data.

[email protected]

Share this news