Private credit growth drops to 7.28% in Dec
This growth is well below the central bank’s target of 9.8% for the first half of FY25, slightly lower than last year’s projection
Private sector credit growth in December 2024 fell to 7.28%, down by 38 basis points from November, due to weakened loan demand, a lack of new investments, and increased investment in government Treasury bills and bonds.
According to data from the Bangladesh Bank, private sector credit growth fell to a 3.5-year low of 7.55% in November, down by 66 basis points from October and the lowest since May 2021, continuing a gradual decline since July, when it stood at 10.13%.
This growth is well below the central bank's target of 9.8% for the first half of FY25, slightly lower than last year's projection.
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Speaking to The Business Standard, Abul Kashem Md Shirin, managing director of Dutch-Bangla Bank, highlighted several factors behind the slowdown in private sector credit growth.
"We are not seeing a surge in new investments among businesses. In fact, the financial situation of some businessmen has deteriorated recently. The demand for retail and SME loans has dropped due to high inflation, and small businesses are not willing to take on additional loan burdens," he said.
He also noted that a shortage of adequate deposits has weakened the lending capacity of certain banks, impacting the entire industry.
"I do not view the slowdown in credit growth as overly negative; it is a temporary situation," said Tanjil Chowdhury, chairman of Prime Bank and managing director of East Coast Group.
He said the focus should be on the proper utilisation of loans rather than just loan growth. The export sector is performing well despite recent instability, which is positive for the economy.
Tanjil noted that stricter loan classification criteria have affected banks' lending ability.
To meet IMF conditions and enhance banking sector transparency, he said, the central bank revised the criteria for classified loans, leading to an increase in classified loans, higher provision requirements, reduced profitability, and a decline in loanable funds.
As a result, banks are now more cautious in lending, he added.
Bangladesh Bank data shows LC openings rose by 14.48% in October and 5.27% in November, after a 7% decline during the September quarter.
