Private sector credit growth increased significantly in August mainly due to higher trade financing by banks for settling import payment obligations, officials and bankers said.
The growth in credit flow to private sector rose to 17.84 per cent in August 2017 on a year-on-year basis from 16.94 per cent a month ago, according to the central bank's latest statistics, released on Thursday.
Such credit growth has already crossed the target, set by the Bangladesh Bank (BB) in its latest Monetary Policy Statement (MPS).
On July 26, the central bank in its first half-yearly (H1) MPS for the current fiscal year (FY), 2017-18, projected that the private sector credit would grow at 16.2 per cent in December 2017 and at 16.3 per cent in June 2018.
"The upward trend in private sector credit growth may continue in the coming months due to higher import payment pressure on the economy," a senior BB official told the FE.
The country's overall imports grew by more than 31 per cent to US$ 9.42 billion in the July-August period of this FY, from $7.16 billion in the same period of the last FY.
Import of foodgrains, particularly rice, has also pushed up the private sector credit growth in the last couple of months, the central banker explained.
He also said the government and the BB have already relaxed the policies concerned to encourage rice import to meet the growing demand for the essential in the local market.
The import of foodgrains, covering rice and wheat, in terms of value rose to $316.66 million in the first two months of FY 18, from $118.08 million in the same period of FY 17.
However, only rice import rose to $182.67 million in the July-August period of this FY, from $2.64 million in the same period of the previous FY, the BB data showed.
The government as well as the central bank took the latest moves against the backdrop of damage to the output of the single-biggest crop, Boro, in May following flashfloods, particularly in the country's haor areas (marshlands).
"Lower interest rates on lending and political stability have encouraged the entrepreneurs to borrow more from local sources to meet their growing demand for investment," the central banker noted.
The weighted average interest rates on lending came down to 9.46 per cent in August 2017 from 10.24 per cent a year before.
The total outstanding loans with the private sector rose to Tk 7,918.07 billion in August 2017 from Tk 7,780.16 billion in July 2017. It was Tk 6,719.25 billion in August 2016.
Talking to the FE, BB Deputy Governor S K Sur Chowdhury said the central bank has already advised the banks at last bankers' meeting on September 10 to take cautious measures in financing against consumer products particularly the lifestyle-related ones.
"We've advised the banks to invest more in the productive sectors than in the less productive ones to facilitate achieving maximum economic growth by the end of this fiscal," he explained.
Syed Mahbubur Rahman, Managing Director and Chief Executive Officer of Dhaka Bank Ltd, said the private sector credit growth may increase in the next couple of months to meet the growing demand for investment, particularly in power and telecommunication sectors.
"But the growth in credit flow to private sector may fall in September, as most imports of food-grains are almost completed."
He also said implementation of different infrastructures along with the mega projects may push up the private sector credit growth in future.
Currently, the government is implementing nine projects under a Fast Track Project Monitoring Committee, headed by Prime Minister Sheikh Hasina.