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Private sector credit growth drops further

FE REPORT | Friday, 5 June 2020


Private sector credit growth decelerated further in April due to lower credit demand following supply chain disruption caused by the coronavirus pandemic, bankers said.

The growth in credit flow to the private sector came down to 8.82 per cent in April 2020 on a year-on-year basis from 8.86 per cent a month ago, according to the Bangladesh Bank's latest statistics.

This growth was 5.98 percentage points lower than the Bangladesh Bank's (BB) target of 14.80 per cent for the second half (H2) of fiscal year (FY) 2019-20.

"Lower trade financing by the banks pushed down the private sector credit growth in recent months," Mehmood Husain, managing director (MD) and chief executive officer (CEO) of NRB Bank Limited, told the FE on Thursday while explaining the latest situation on the market.

Country's overall imports dropped by nearly 62 per cent or US$3.13 billion in April last mainly due to the spread of coronavirus in different parts of the world including Bangladesh.

Settlement of letters of credit (LCs), generally known as actual import, in terms of value, came down to $1.95 billion in April 2020 from $5.08 billion in the same month of 2019.

On the other hand, opening of LCs, generally known as import orders, fell by nearly 70 per cent or $3.66 billion to $1.60 billion in April from $5.26 billion a year ago, the BB data showed.

The senior banker expected that the private sector credit growth might rise slightly this month following implementation of the government-announced financial stimulus packages.

Prime Minister Sheikh Hasina has so far announced a total of 19 stimulus packages worth Tk 1.03 trillion to offset the shock of novel coronavirus (COVID-19) pandemic on various sectors of Bangladesh.

The packages, which are 3.7 per cent of the GDP, are being implemented under the supervision of the central bank and the ministry of finance.

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