Bangladesh Bank has started the process of drafting the monetary policy statement for the first half of the coming fiscal year 2017-18 targeting to increase the private credit growth slightly with a view to achieving the GDP growth of 7.4 per cent set by the government for the year.
A BB official told New Age on Wednesday that the concerned departments of the central bank had already arranged a number of meetings to prepare the MPS for the first half of next fiscal year.
He said the BB would not increase the ceiling of the private sector credit growth much even it might keep unchanged the target of 16.50 per cent, which was set for the January-June period of FY17.
The central bank may increase maximum 0.50 per cent credit growth in the private sector for the July-December period of FY18, he said.
The central bank is now facing difficulties to fix the private sector credit growth as the government set a highly ambitious GDP growth against a lower inflation target of 5.50 per cent for FY18, he said.
The BB will try to balance the credit growth to achieve both the GDP growth and inflation target, he said.
The BB data showed that private sector credit growth continued to maintain an upward trend in April, six months in a row, as banks are now focusing on disbursement of consumer and farm loans to sustain their profitability.
In April, the year-on-year private sector credit growth stood at 16.21 per cent, which is close to the monetary target of 16.50 per cent for the second half of FY17.
Despite a continuous higher credit growth in the private sector, there was no large investment in the productive zone which created an alarming situation for the country’s banking sector, the BB official said.
The private sector credit growth stood at 16.56 per cent in FY16 against the central bank target of 14.80 per cent.
The official said that the projected target of private investment against GDP posted a stagnant situation as it registered 23 per cent in the outgoing fiscal year against the same ratio of FY16.
For this reason, a question has been raised as to where the disbursed loans were being invested by the borrowers, he said.
He feared that some banks might have disbursed loans aggressively in favour of a few businesspeople that might play role in fuelling the private sector credit growth.
The defaulted loans in the banking sector rose by Tk 11,236.68 crore in just three months (January-March) of this year as the banks distributed the loans breaching the credit discipline.
The BB data showed that the amount of defaulted loans in the banking sector stood at Tk 73,409 crore as of March 31, 2017, rising from Tk 62,172.32 crore as of December 31, 2016.
‘Financial scams may increase in the banking sector if the central bank injects more credit in the market. So, the central bank will follow a cautious policy to set the growth of reserve and broad money’, the central banker said.
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