Ensuring the quality of credit to achieve maximum economic growth by the end of this fiscal gets top priority as the central bank prepared to formulate country's next monetary policy.
Officials said the priority was suggested at an internal preparatory meeting on the monetary policy statement (MPS) at the Bangladesh Bank headquarters Sunday with BB Governor Fazle Kabir in the chair.
All general managers (GMs) and officials above that station of the BB were eligible to attend the initial MPS-preparatory meeting, according to them, which got on the table the entire gamut of problems and plans on the monetary-financial and economic front.
The meeting reviewed the country's overall economic situation and suggested that the next MPS for the second half (H2) of the fiscal year (FY) 2017-18 should be 'growth-supportive', holding inflation in check at a reasonable level.
The policymakers also emphasised ensuring the quality of credits through strengthening the monitoring and supervision by both the BB and the commercial banks themselves.
As part of the moves, the central bank may discourage credit flow to less-productive sectors, including consumer financing, in the near future for bringing down the inflation within target from the existing level by the end of this fiscal.
The government as well as the central bank had set the inflation target at 5.5 per cent for the FY 18, which has been crossed.
The inflation rose to 5.70 per cent on a 12-month-average basis in December last calendar year from 5.64 per cent a month before. It was 5.52 per cent in December 2016.
BB's latest move came against the backdrop of rising trend in credit growth to the private sector in the recent months mainly due to higher trade financing for settling import-payment obligations, particularly for food-grains, fuel oil and capital machinery.
The growth in credit flow to private sector rose to 19.06 per cent in November 2017, on a year-on-year basis, from 18.63 per cent a month ago, according to the central bank's latest statistics. It was 15.61 per cent in January 2017.
Such credit growth has already overshot the mark, set by the central bank of Bangladesh in its outgoing MPS.
Earlier on July 26 last, the BB projected in its first half-yearly (H1) monetary-policy statement for the FY 18 that the private-sector credit would grow at 16.2 per cent in December 2017 and 16.3 per cent in June 2018 respectively.
The total outstanding loans with the private sector rose to Tk 8269.44 billion in November last from Tk 8126.80 billion in October 2017. It was Tk 6945.58 billion in November 2016.
The private-sector credit-growth target for the next MPS may come up for discussion at a stakeholders' consultation meeting, scheduled to be held in the capital today (Monday), according to the BB officials.
Earlier on January 04, the central bank hinted at a bankers' meeting that the limit to advances-deposit ratio (ADR) might be slashed to help check any possible liquidity pressure on the market due to 'aggressive lending'.
The possible change in ADR is expected to be incorporated into the next MPS. The MPS is expected to be announced at the end of this month.
In the next MPS, the BB will also give emphasis on boosting SME and agriculture loans along with microcredit to create employment opportunities across the country, they added.
The latest situation of both foreign exchange and money market will be considered in the next MPS, a BB senior official told the FE.
He also said the ongoing monitoring by the BB on the capital market will continue in the coming months for ensuring stability in the country's overall financial sector.