Pvt sector credit growth falls slightly in Feb

Private sector credit growth fell by 0.20 percentage points in February compared to the previous month after a rally for the first eight months of the current fiscal year mostly powered by burgeoning import and export.

However, the growth is still 10.87% higher compared to the corresponding month of the last year.

"The Russia-Ukraine war affected the February credit growth slightly, as the conflict caused troubles to some imports," Habibur Rahman, chief economist at the Bangladesh Bank, told The Business Standard.

Private sector's loan appetite has been upward since the economy reopened after the Covid-led situation. Particularly, small entrepreneurs borrowed heavily, leading to an overall increase in private sector loan growth. In January, private sector loan growth was the highest in the past two and a half years.

Habibur Rahman said the central bank's lending target to the private sector is likely to be fulfilled by June as Russia and Ukraine seem to be moving towards a solution.

Private sector loans amounted to around 11.53 lakh crore in February 2021, which increased to around 12.78 lakh crore in December 2022.

Sector people said the surged imports, especially a rise in capital machinery import, has led to an increase in private sector loans.

In the first seven months of the current 2021-22 fiscal year, the rate of LC opening increased by 49%, while LC settlement increased by 52.50% – pushing up the demand for US dollars.

Meanwhile, export earnings soared about 31%, while remittance in the July-January period dropped by 19.46%.

Syed Mahbubur Rahman, managing director & CEO of Mutual Trust Bank, said although the private sector credit growth slightly dropped in February, it would increase in March due to more imports ahead of the Eid.

The Bangladesh Bank announced its monetary policy for the current fiscal year in July, targeting a 14.8% private sector loan growth.

Central bank data show private loan growth dropped as low as 7.55% in May last year, and then started to tick up gradually until January this year.