Commercial banks in Bangladesh are increasingly diverting funds into government securities (G-sec) to tackle budget shortfalls and inflationary pressures, exacerbated by a halt on money printing. This strategy has caused G-sec holdings by banks to rise significantly, reaching 68% of the market in FY 2023-24 from 61% in the previous fiscal year. Total G-sec market size expanded to Tk 5.50 trillion from Tk 4.89 trillion, with treasury bonds making up Tk 4.08 trillion and treasury bills Tk 1.42 trillion.
The shift has sparked concerns over a crowding-out effect on private sector credit availability, despite banks citing lower business demand. Industries and business chambers have voiced worries over rising costs of formal credit and reduced access, amid liquidity pressures and declining private sector credit growth to 9.90% in April 2024, down from 11.28% a year ago. As the economy navigates these challenges, the focus remains on balancing government financing needs with sustaining private sector growth.
Source for more details:
