In December 2024, private sector credit growth dropped to 7.28%, a 38 basis point decrease from November, as a result of greater investment in government Treasury bills and bonds, a paucity of new investments, and weaker loan demand. Private sector loan growth slowed to a 3.5-year low of 7.55% in November, according to data from the Bangladesh Bank. This was the lowest since May 2021 and a 66 basis point decrease from October, continuing a slow slide that began in July when it was at 10.13%. This growth is marginally below last year’s forecast and far below the central bank’s goal of 9.8% for the first half of FY25.
The managing director of Dutch-Bangla Bank, Abul Kashem Md Shirin, discussed a number of reasons for the halt in the expansion of private sector lending in an interview with. “New business investments are not increasing at an alarming rate. In actuality, several businessmen’s financial circumstances have recently gotten worse. High inflation has caused a decline in the demand for retail and SME loans, and small businesses are unwilling to take on further debt, he said. He added that the industry as a whole has been impacted by some banks’ diminished lending ability due to a lack of sufficient deposits.
Tanjil Chowdhury, the managing director of East Coast Group and chairman of Prime Bank, stated, “I do not view the slowdown in credit growth as overly negative; it is a temporary situation.” According to him, the emphasis should not just be on loan growth but also on the appropriate use of loans. Despite recent turbulence, the export sector is doing well, which is good for the economy. Tanjil pointed out that banks’ capacity to lend has been impacted by more stringent loan classification standards.
According to him, the central bank changed the rules for classified loans in order to comply with IMF regulations and improve the transparency of the banking industry. As a result, there were more classified loans, greater provision requirements, lower profitability, and fewer loanable funds. He noted that banks are now lending with greater caution as a result. According to data from Bangladesh Bank, LC openings increased by 14.48% in October and 5.27% in November following a 7% decrease in the September quarter.
Source: The Business Standard
