The private-sector credit growth decelerated further in March as private banks faced liquidity pressure due mainly to lower deposits, bankers said.
The growth in credit flow to the private sector came down to 12. 42 per cent in March 2019 on a year-on-year basis from 12.54 per cent a month ago, the central bank's latest data showed.
This growth was 4.08 percentage points lower than the Bangladesh Bank (BB)'s target of 16.50 per cent for the second half (H2) of this fiscal year (FY).
Such declining trend in the private-sector credit growth may hamper economic growth in future, according to senior bankers.
"Of course, there is a link between private sector credit and overall economic growth," Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh, told the FE.
However, the senior banker said this may not hamper economic growth right now. But it may affect the economic activities in the medium term, he added.
But a senior Bangladesh Bank official sounded upbeat.
The official told the FE: "We may easily achieve 7.8 per cent GDP (gross domestic product) growth by the end of this fiscal with the private sector credit growth."
The central banker emphasised proper use of credit for achieving optimum economic growth, saying that the quality of credit will have to be ensured to attain the desirable GDP growth.
The senior bankers, however, said most of the private commercial banks (PCBs) are now facing liquidity pressure due to unavailability of funds, particularly from individual depositors.
Individual deposits are being diverted to the government schemes due mainly to higher interest rates on public savings instruments than deposit rates offered by the commercial banks, they added.
Currently, banks are offering interest rates on term deposits ranging from 6.0 per cent to 11 per cent.
However, most of the offered rates were fixed at 9.50-10.50 per cent. On the other hand, yields on national savings certificates have been fixed at between 11 per cent and 12 per cent.
But the ABB chief expressed the hope that the liquidity inflow in the market will improve in the near future as the interest rates on deposit are now maintaining an upward trend.
Talking to the FE, a senior executive of a leading PCB said some private lenders have already scaled down their loan disbursement, particularly for the corporate entities due to liquidity pressure in the market.
He also said the demand for fresh liquidity may rise before the implementation of the BB's policy for offshore banking operation of the banks.
As per the policy, issued by the central bank of Bangladesh, on February 25, the banks will have to keep 13 per cent of their total liabilities as statutory liquidity ratio (SLR) and 5.50 per cent as cash reserve requirement (CRR) from July 01.
On the other hand, the total outstanding loans with the private sector rose to Tk 9,796.86 billion in March 2019 from Tk 8,714.31 billion last year.
It was Tk 9,703.49 billion in February 2019.
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