Private sector credit growth decelerated further in November as fresh borrowing demand dropped after the second wave of Covid-19 hit the country, experts said.
Private credit growth fell to 8.21 per cent (year-on-year) in November this year from 8.61 per cent a month ago, according to the Bangladesh Bank's (BB) latest statistics.
This growth was 3.29 percentage points lower than the BB's target of 11.50 per cent for the first half (H1) of the current fiscal year (FY 2020-21).
Businesses are following a 'go-slow' policy mainly due to the looming uncertainty over the resurgence of the deadly virus, according to bankers and economists.
The private sector credit growth may pick up from March in the next calendar year after the arrival of the coronavirous vaccine in Bangladesh, they predicted.
On Sunday, health minister Zahid Maleque said that the first batches of Oxford vaccine would arrive in the country by the end of January or mid-February.
Talking to the FE, Mustafa K Mujeri, former director general of the Bangladesh Institute of Development Studies (BIDS), suggested the policy makers lay emphasis on selecting and targeting investments to help increase the private sector credit growth in near future.
"This kind of initiative will help enhance return on investments, which is also essential for attracting investors," noted Dr. Mujeri, a former chief economist at the central bank.
The private sector credit growth has registered a falling trend in the last two months because both bankers and businessmen are now concerned following the second wave of Covid-19 pandemic, according to Shah Md. Ahsan Habib, director of the Bangladesh Institute of Bank Management (BIBM).
Dr Habib feared trade financing, particularly in luxury items, would fall further as a fallout of the second wave.
Senior bankers, however, said lower import has pushed down the private sector credit growth in recent months.
The import payments dropped by nearly 13 per cent to $15.78 billion during the July-October period of FY'21 from $18.14 billion during the same period of last fiscal year.
"The majority of businessmen are now following a 'go-slow' to avoid the uncertainty over the second wave of Covid-19," Syed Mahbubur Rahman, former chairman of the Association of Bankers, Bangladesh (ABB), told the FE on Monday.
Mr Rahman, also managing director (MD) and chief executive officer (CEO) of Mutual Trust Bank Limited, said he does not foresee any "significant improvement" in the private sector credit growth until March 2021.
M A Halim Chowdhury, MD and CEO of Pubali Bank Limited, expected the private sector credit growth to pick up in March 2021.
Meanwhile, outstanding loans with the private sector rose to Tk 11,209.02 billion in November from Tk 10,358.15 billion from the same period a year ago. It was Tk 11,143.22 billion in October 2020.
Talking to the FE, a BB senior official said the amount of private sector credit increased, but the growth in percentage terms has decreased in the aftermath of the pandemic.
"Some business entities have adjusted their earlier high-cost borrowing with loans under the low-cost government's announced stimulus packages," the central banker said, explaining the lower growth in private sector credit.
