Private sector credit growth rose slightly in May but remained below the 5 percent mark, underscoring continued weak demand for bank borrowing despite a series of government and central bank measures aimed at reviving business lending.
According to updated data released by Bangladesh Bank on Sunday, private sector credit growth stood at 4.98 percent at the end of May, up marginally from 4.75 percent in April, which was the lowest level in 22 months.
Following the parliamentary election held in February, private sector credit growth had fallen further to 4.72 percent in March before recovering modestly over the following two months.
Bangladesh Bank data showed outstanding credit to the private sector reached Tk 18.25 lakh crore at the end of May, compared with Tk 17.48 lakh crore a year earlier, resulting in year-on-year growth of 4.98 percent.
Since taking office, the BNP-led government has introduced a range of measures to stimulate private sector borrowing and support business activity.
In its latest Monetary Policy Statement for the first half of the current fiscal year, Bangladesh Bank also announced several initiatives to encourage lending.
These include narrowing the spread between deposit and lending rates to reduce borrowing costs, a Tk60,000 crore stimulus package to help reopen closed factories, reducing the down payment requirement for loan rescheduling to 1 percent, and introducing a one-time exit facility that includes interest waivers and a two-year grace period.
A senior Bangladesh Bank official said the impact of these measures would take several more months to become visible.
The central bank had targeted 8 percent private sector credit growth for the January-June period under the previous monetary policy. However, actual growth remained well below that target through May.
Reflecting the subdued credit demand, Bangladesh Bank lowered its projection for private sector credit growth to 6.8 percent by December in its latest Monetary Policy Statement. The central bank expects existing policy support and easing measures to gradually lift lending during the second half of the year.
Meanwhile, government sector credit growth eased sharply to 24.61 percent at the end of May from 30.37 percent in April, according to Bangladesh Bank data. Under the latest monetary policy, the central bank projects government credit growth of 21.8 percent over the next six months.
Overall domestic credit growth also moderated, falling to 8.63 percent in May from 9.65 percent in April.
Although private sector credit growth improved slightly during the month, the decline in government borrowing growth led to an overall slowdown in domestic credit expansion.
Bangladesh Bank’s latest monetary policy targets overall domestic credit growth of 10.5 percent over the next six months.
