Private sector credit growth rises

Private sector credit growth rose to 13.97 per cent in November to near the central bank's target for the ongoing financial year owing to cheaper loans, a development that may stoke inflationary pressures.

The Bangladesh Bank has aimed a 14.1 per cent credit expansion for 2022-23, which began in July.

The growth surged to 14.07 per cent in August before falling to 13.93 per cent in September and 13.91 per cent in October as banks' capacity to disburse loans eroded due to the ongoing stress in the foreign exchange market.

Some banks are purchasing American greenbacks almost every day from the central bank in exchange for the taka to clear import bills, so the majority of lenders are witnessing a shortage of loanable funds.

But a recent report of the central bank blamed the unprecedented depreciation of the taka against the US dollar for the increase in the private sector credit growth at higher rates in recent times.

Bangladesh Bank has aimed a 14.1 per cent credit expansion for 2022-23, which began in July

The taka lost its value by up to 21 per cent in November compared to a year earlier owing to the depletion of the foreign currency reserves.

Reining in inflation is needed for Bangladesh in order to contain higher consumer prices.

Inflation surged to a 10-year high of 9.52 per cent in August before easing to 8.71 per cent in December.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said since the real lending rate has become zero owing to the 9 per cent interest cap on loans amid escalated inflation, there has been a pickup in demand for funds from borrowers.

The central bank has maintained the interest rate ceiling since April 2020.