Private credit growth continues ascent

Credit growth to the private sector continues with the increase, helped in part by increased imports of food grains and capital goods.

In October, private sector credit growth was 18.63%, well above the target of 16.2% set for the first half of the year. , according to data from the Bangladesh Bank.

The last time credit growth was higher than this one was back in March 2012, when it was 19.5%.

"Strong credit growth is unusual," said a senior BB official, adding that banks are often asked to be cautious in their lending.

In July, credit growth to the private sector was 16.94%, exceeding the monetary target of 16.2% for the first half of 2017.

Growth slowed slightly to 17.8% in September against 17.84% in August.

The increase in credit growth is due to the deferred payment of letters of credit, mainly for food grains and capital machinery, said MA Halim Chowdhury, managing director of Pubali Bank.

The LC's opening value against food grains tripled to $ 1.55 billion in July-September of the year. During the period, the opening of the LC for capital goods climbed 27.4% to $ 1.32 billion.

Stronger credit growth will put pressure on the lending rate very soon, as some banks have already revised up their interest rates, he added.

The government's development work and the establishment of power plants have increased the demand for credit, said Md Arfan Ali, Managing Director of Bank Asia.

Banks lend to power plant projects following the government's call to provide 20,000 Tk crores to the energy sector.

Ali echoed Chowdhury's view that rising demand for credit would drive up lending rates.

Earlier in July, the government formed a committee to review the 1991 Bank Company Act to verify whether there is a provision that prevents banks from providing major loans to the banking sector. l & # 39; energy.

The move was made after the power division asked the banks to channel 20,000 Tk crores into the electricity sector in December.

At present, banks can extend loans of up to 25% of their capital to a single borrower. For some banks, it would not be possible to lend to the scale required by the electricity companies without exceeding the limit.

On the other hand, credit growth in the public sector remained negative because of the exceptional sales of savings instruments. It was -12.13%, which is far from the monetary ceiling of 3.80% for December.

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