Private credit growth 9.96% in February

Private sector credit growth slightly increased to 9.96% in February, up 0.01 basis points from January, amid Bangladesh Bank's contractionary monetary policy that keeps interest rates higher to diminish the loan appetite for businesses.

Bangladesh Bank data shows that private credit growth was 9.95 in January. And 10.13% in December 2023, the highest in six months.

Private credit stood at Tk15.77 lakh crore at the end of February 2024, up from 14.34 lakh crore at the end of February 2023.

The central bank has set a private credit growth target of 10% for the January-June period of the 2023-24 fiscal. However, the growth observed in January fell short of this target.

According to bankers, as the Bangladesh Bank has been adhering to a contractionary monetary policy since July 2023, interest rates on loans to customers are increasing every month. The cost of funds for banks has increased as the policy rate has been increased several times, leading to a decrease in private sector credit growth.

Moreover, several banks in the country have been facing a liquidity crisis for the past year. Due to their own liquidity crisis, these banks have reduced loan disbursement to customers, the bankers further added.

Central bank data shows that private sector credit growth was 12.62% in January 2023. Since then, credit growth had been declining continuously until September. Although it increased slightly to 10.09% in October, the growth fell again in November.