Bangladesh Bank is likely to announce on January 29 the monetary policy for the second half (January-June) of the current fiscal year 2017-2018 keeping ‘unchanged’ the private sector credit growth target set out for the period in the MPS for the first half of the year.
BB officials said the central bank was still working on setting the credit growth targets and to ascertain whether to incorporate a provision to cut advance deposit ratio for banks, given the sensitivity surrounding the issues in an election year.
They said the central bank would try to strike a balance between controlling money supply for reining in inflation and possible increase in election-centric expenses.
Officials said that although in the MPS for the first half BB had set the private sector credit growth target at 16.2 for July-December, the actual credit growth in private sector shot up to around 20 per cent in December, gradually rising every month since July.
They said the fast increase in private sector credit
growth was a matter of concern as the rate of inflation was on an upward trend hovering around 5.83-6 per cent in last few months against the target of 5.8 per cent.
Officials said that BB might keep the private sector credit target of 16.3 per cent unchanged for January-June which was set in the MPS for June-December.
‘If the private sector credit growth target is kept at 16.3 per cent, it would mean that the banks will have to cut down the growth rate to 16.3 per cent by June from around 20 per cent in December,’ said an official.
He said that if the private sector credit growth could be maintained at around 16.3 per cent, the central bank expected that the inflation would be contained.
Officials said the central bank was awaiting government’s decision on whether and when it should reduce the banks’ advance-deposit ratio given the opposition by banks about such decision in an election year when spending would increase for government’s development works.
Following a meeting with chief executives of all banks, BB deputy governor SK Sur Chowdhury on January 3 told reporters that the central bank would cut the advance-deposit ratio to 80.5 per cent for conventional banks from 85 per cent and to 88 per cent from 90 per cent from Islamic banks to contain credit growth to private sector.
Association of banks’ chief executives, however, urged the central bank not to cut the ADR ratio considering possible government spending for development works in the election year.
In the monetary policy, the central bank might not address the ADR issue and take a decision later, said an official.
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