Private banks’ credit growth rebounds

Private banks saw a substantial increase in credit growth towards the end of last year, but the ongoing political turmoil might put a damper on that, bank officials said.

Credit growth of private banks, whose share in the total credit comes to 69.90 percent, accelerated 16.53 percent year-on-year in November last year, reports The Daily Star.

The sector’s overall credit stood at Tk 690,045 crore, up 12.43 percent year-on-year.

Credit growth started to accelerate from the middle of last year as political tension abated following the parliamentary election on January 5, Muklesur Rahman, managing director of NRB Bank, said.

People had been observing the situation till June to see whether the political environment returned to 2013-like level. When they were convinced about the conducive environment, they started investing again, he added.

Between July and September, industrial term loans soared 44 percent year-on-year, according to data from the central bank.

However, the return of political unrest means the trend of buoyant investment is likely to be cut short, according to Rahman. If the crisis is not resolved quickly, investors may shy away again, said Helal Ahmed Chowdhury, former managing director of Pubali Bank.

Political uncertainty is very harmful for new investment, said Zaid Bakht, chairman of Agrani Bank, adding that prompt resolution of the unrest may be sufficient to sustain the investment momentum from last year.

As of November last year, state banks, which account for 19.28 percent of total loans, have seen positive credit growth. Even until June last year, state banks had negative credit growth, according to data from the central bank.

Credit disbursement by state-owned commercial banks increased 5.55 percent and state-owned specialised banks 8.78 percent.

Chowdhury pinned the cautious approach adopted by state banks in giving out fresh loans after a series of scams in recent times for the relatively lower credit growth.

Furthermore, the state banks have an upper limit on their loan growth after the watertight agreement signed with Bangladesh Bank, Bakht said.

The Agrani chairman also blamed the lengthy decision-making process of state banks. Private banks can take quick decisions and go for aggressive lending, but the state banks do not have that liberty, he added.

Meanwhile, foreign banks saw a decline of 8.39 percent in credit growth in November.