Pvt sector credit growth inches down in Jan

Staff Correspondent | Published: 22:01, Feb 28,2021

 
 

Private sector credit growth dropped marginally in January after a slight recovery in the previous month as businesses still observed caution about making fresh investments.

A provisional data of the central bank said that growth in the private sector credit inched down to 8.32 per cent in January 2021 from 8.37 per cent in December 2020.

Disbursement was 6.48 percentage points lower than the BB’s monetary projection of attaining 14.8 per cent growth in the current fiscal year 2020-2021.

Former adviser to a caretaker government and economist AB Mirza Azizul Islam told New Age, ‘It seems that the investors are not interested to invest due to the coronavirus-induced economic situation.’

Income erosion of the people has resulted in weakened demand, he said, adding that the businesses will not produce goods when demand is dull.

Since demand is dull, businesses would neither enhance their capacity nor utilise their capacity in full, resulting in a decline for credit demand, Mirza Azizul said.

Negative growth in the import of intermediate goods and capital machinery was also a reflection of the investment situation in the country, the economist said.

Apart from these, the investors are still dissatisfied with the ease of doing business and infrastructure in the country, he said.

On the other hand, bankers are reluctant to issue credit after the implementation of the 9-per cent lending rate, said Mirza Aziz, adding, ‘Instead of taking the risk of issuing credit to the borrowers, investment in government securities has become more lucrative to them as such investments are risk free.’

The BB data also showed that the banks had a huge amount of excess liquidity on their hands.

Asked about the credit growth situation, Mutual Trust Bank managing director and chief executive officer Syed Mahbubur Rahman told New Age that he was not very optimistic about significant changes in the credit growth situation before June.

He projected that the private sector growth may reach around 10 per cent at the end of June.

The growth rate may improve when letter of credits which had been opened in the last couple of months are realised.

More about:

Want stories like this in your inbox?

Sign up to exclusive daily email

Advertisement

 

Advertisement

images