Staff Reporter :
Private sector credit growth in Bangladesh exceeded expectations this year, reaching 10.49 percent in March despite challenges such as high interest rates, reduced lending capacity by banks, import-trade contractions, and ongoing economic difficulties.
According to data from the Bangladesh Bank (BB), private sector credit growth was 9.95 percent in January and 9.96 percent in February. In the latest monetary policy for H2FY24 (January to June), the central bank lowered the private sector credit growth target from 11 percent to 10 percent to manage demand in an economy grappling with persistent inflation over the past two years.
In March, despite marking the highest growth in the first nine months of FY24, the private sector credit growth rate fell well short compared to the same month in the previous year, according to Bangladesh Bank (BB) statistics. Last year, in March 2023, the growth rate was notably higher at 12.03 percent.
Experts have highlighted that over the past year, import LCs exceeding $6 billion have been a rarity due to import-trade contractions. However, in March, there was a significant uptick in the opening and settlement of import Letters of Credit (LCs) compared to February.
The observed growth in March was largely fueled by increased imports and heightened business transactions associated with Ramadan and Eid-ul-Fitr festivities.
Emranul Huq, Managing Director of Dhaka Bank, attributed the subdued credit growth in recent months to rising interest rates resulting from the central bank’s measures to control inflation and the prevailing import-trade contraction.
Nevertheless, the credit growth in March surpassed the central bank’s target, boosted by higher imports during Ramadan and increased consumer loans for Ramadan and Eid-related expenses. The private sector credit growth was 8.35 percent in FY 2020–21, 13.66 percent in FY 2021–22, and 10.57 percent in FY 2022–23.
Meanwhile, agricultural loan disbursement witnessed a 10.55 percent increase during the July–March period of the current fiscal year (FY 2023–24) compared to the matching period of the last financial year.
According to Bangladesh Bank data, agriculture and rural credit rose to Tk 26,667 crore at the end of the third quarter (Q3) of this FY from Tk 24,122 crore in Q3 of FY23.
The BB-set agriculture credit disbursement target in FY24 is Tk35,000 crore, which was Tk30,811 crore in FY23.