The credit growth of the private sector has returned to the downward trend in March after a slight recovery in April as the businesses again stopped their plans for investment during the resurgence of the coronavirus outbreak in the nation.
Data from the Bangladesh Bank has illustrated that the growth in the private sector credit decreased to 8.79 per cent in March 2021 from 8.93 per cent in February 2021.
The data from the central bank has illustrated that the banks’ outstanding credit to the private sector reached Tk 11,60,332 crore at the end of March from Tk 11,53,511 crore in February.
In March 2020, the volume of outstanding credit to the private sector was Tk 10,66,580 crore.
In March, the disbursement was at 6.01 percentage points lower than the Bangladesh Bank’s monetary projection of attaining 14.8 per cent growth in the current fiscal year 2020-2021. In January 2021, the growth rate was 8.32 per cent.
Bankers and economists have made predictions that the Bangladesh Bank would miss its monetary policy projection for the fiscal year of 2021 as the nation entered into fresh coronavirus restriction phase on April 14.
At the beginning, the restrictions on public movement and business activities were imposed for 8 days, but the restriction period was extended till May 5 that discouraged the businesses from making any fresh investments.
AB Mirza Azizul Islam, former adviser to an interim government economist, has stated, ‘It seems that the investors are still not interested to take loans.’
‘I don’t see any hope of an immediate change in the situation,’ said Mirza Aziz, adding that as a result, the private sector credit growth has been hovering at 8-9 per cent since the outbreak of coronavirus in Bangladesh.
Mirza Aziz stated that besides the businesses’ reluctance to take fresh bank loans, banks were also reluctant to issue credit to the businesses at the government-set lending rate of 9 per cent.
In the current fiscal year 2020-2021, the highest private sector credit growth was 9.48 per cent in September 2020.
Bangladesh Bank official stated that the credit growth rate until September 2020 was above 9 per cent but dropped below 9 per cent in the aftermath when the businesses’ appetite for stimulus funds waned.
To get rid of the huge amount of excess liquidity, banks are now focusing on the consumer segment since the recovery rate of consumer loans is higher than the industrial loans, bankers said.
Some banks are offering loans to the retail segment even at 8 per cent interest rate, they said.