Bangladesh
5 years ago

Lower private sector credit growth to hit investment

FBCCI says in response to new MPS

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The country's apex chamber on Saturday said the central bank's lower private credit growth target would impact investment, especially in smaller firms.

In its reaction to the latest Monetary Policy Statement (MPS) unveiled on Wednesday, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) said that increased credit flow was inevitable for higher economic growth.

"Lowering the target would squeeze credit flow to the private sector, which will ultimately hurt investments," the FBCCI said in a statement.

The private credit growth target in the Bangladesh Bank's July-December MPS has been set at 14.8 per cent, 1.7 percentage point lower than that of fiscal year 2018-19.

The FBCCI said the private sector may face trouble due to higher credit flow to the public sector.

The credit growth target for the public sector has been raised by more than 100 per cent to 24.3 per cent, which was just 10.9 per cent in the past fiscal year.

The chamber, however, said that the lending rate of banks and financial institutions still remained double-digit.

"We believe that the single digit rate of interest for lending is necessary for boosting industrialisation," the statement said.

"We also believe that the banks and financial institutions would bring down the rate of interest to single-digit shortly," it said.

The FBCCI expressed its dissatisfaction over higher non-performing loans in the banking sector.

"The NPL is a very much sensitive and important issue and it is considered as a burden," it said.

Noting NPL is an impediment to investment, the chamber said, "The measures for reducing the NPLs should be strengthened further."

The banking system should be more efficient and investment-friendly.

The FBCCI noted that the banking system should be digitalised fully and made paperless as part of the government's vision for digital Bangladesh.

It supported the central bank's move to announce the monetary policy yearly rather than on a half-yearly basis.

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