Private sector credit growth picks up

Private sector credit growth crossed the 16 percent mark for the first time in six months in March on the back of higher investment in government's infrastructure projects and a surge in SME lending amid lower interest rate.

In March, credit growth stood at 16.06 percent -- which is close to the monetary target of 16.5 percent set by the Bangladesh Bank for the second half of the fiscal year. In February, the credit growth stood at 15.88 percent.

At the end of March, the banking sector's total outstanding loans stood at Tk 738,640 crore, up 1.5 percent from the previous month, according to data from the BB.

The government's mega infrastructure projects meant that imports surged, which, in turn, contributed to the higher credit growth, said Mohammed Nurul Amin, managing director and chief executive officer of Meghna Bank. Moreover, banks focused on lending to agriculture and small- and medium-sized enterprises to expand their business activities, which also helped in bumping up private sector credit growth.

The BB recently raised the ceiling for credit card and consumer loan, a move that increased the money movement among the clients, he said.

With the view to stimulating consumption in the economy, the central bank doubled the credit card limit to Tk 10 lakh and extended the personal loan ceiling to Tk 5 lakh from Tk 3 lakh.

On the other hand, government borrowing has remained negative, meaning even if the private sector credit growth overshoots the target it will not put pressure on inflation.

Public sector credit growth stood at 8.93 percent in the negative in March -- way off the target of 16.10 percent set in the monetary policy for the latter half of the fiscal year.

Domestic credit growth stood at 12.18 percent at the end of March -- far below from the target of 16.40 percent.