International Business Forum of Bangladesh (IBFB) said the Monetary Policy Statement (MPS) has set the lower private sector credit growth target which will affect the industrial production and employment generation in the country.
"Such a reduction of the private sector credit growth target may affect in achieving 8.20 per cent GDP growth for the ongoing fiscal year 2019-20," the IBFB said in a reaction to the latest MPS, unveiled by the Bangladesh Bank.
The MPS set the private sector credit growth target at 13.2 per cent for the first half (July-December) of FY 2019-20 and 14.8 per cent for the full year against 16.5 per cent growth target set for the previous fiscal year (FY 2018-19).
The overall domestic credit growth was projected at 15.9 percent while the public sector credit from the banking system was set at 24.3 percent and the private sector credit growth at 14.80 percent with a view to contain inflation within 5.5 per cent and support the 8.2 per cent GDP growth target.
"The National Budget 2019-20 has the provision of taking Tk. 77,363 crore loan from local sources like banks and saving certificates. The targeted loan from saving certificates will reduce the deposit of bank and have impact on loan for private sector," the IBFB said.
It said Bangladesh Bank (BB) is going to open market operation activities at an interest rate from the current monetary aggregate based monetary policy.
This will have a direct impact on interest rates by giving or raising liquidity to banks. In contrast, the Finance Minister recently declared that BB is going to issue policy to cap the interest rate of 6% on deposit and 9% on bank loan.
"It is just contrary to the declared monetary policy. However, BB proposes to bring the informal economic activities into formal sector through introducing ICT based transaction. This is a good initiative," the chamber opined.