Bangladesh News

Credit in commercial banks decreased while deposit showed a slight growth in the first two months of the year, and the bankers relate it to the recent spree of anti-graft drives for the unusual trend.
Economists view this is only a temporary effect of a strict measures taken for welfare of the country.

The Bangladesh Bank (BB) statistics show that credit in commercial banks decreased 0.12 percent in the period from December 31, 2006 to February 22, 2007 while deposit rose by only 0.89 percent in the same period.

According to the central bank data, deposit growth was 4.34 percent and credit growth was 4.06 percent in the two months period of November and December 2006.

“The overall growth of credit and deposit in 2006 was 20 percent and 18 percent respectively,” a BB official said quoting from official statistics.

Asked about the unusual trend in the banking sector, bankers said their clients are in panic following the ongoing anti-graft drives by the joint forces.

Besides, the National Board of Revenue (NBR) froze bank accounts of a number of people on suspicion of corruption, a top official of a private commercial bank said, adding that the move prompted many clients to withdraw their deposits.

A managing director of another private bank said if the trend continues, there might be a crisis in the banking sector in near future. “The government should address the reasons behind the reduction in deposit and credit and take proper measures,” he said.

The BB sources said the government is also concerned about the panic in the banking sector and the law enforcers have been asked to carry out their anti-corruption drives in a more coordinated way to avoid giving rise to panic among honest clients.

According to the BB data, the total volume of credit was Tk 1,42,257 crore on December 31, 2006 in 43 commercial banks comprising four nationalised commercial banks (NCBs), 30 private commercial banks (PCBs) and nine foreign commercial banks (FCBs). The figure lowered to Tk 1,42,087 crore on February 22 this year.

The total volume of deposit in the banks during this period increased a bit from Tk 1,76,182 crore to Tk 1,77,759 crore.

Credit in three of the four NCBs decreased from 1.0 percent to 4.33 percent during the period while the other witnessed only 0.25 percent growth. The overall decrease in credit in the NCBs was 2.04 percent.

The deposit situation in the NCBs also portrayed a grim picture with an average decrease of 0.69 percent. Three NCBs witnessed a decrease in deposit from 0.30 percent to 1.85 percent while the other saw a slight growth of 1.80 percent.

Credit in the PCBs increased slightly by 1.07 percent, but 15 of the 30 PCBs showed decrease in credit ranging from 0.66 percent to 6.64 percent during the period between December 31, 2006 to February 22, 2007.

Although overall deposit in the PCBs saw 1.87 percent growth, nine of the 30 banks witnessed deposit reduction.

The central bank data shows that the FCBs showed both credit and deposit growth during the period, albeit very slim ones. Overall credit growth in the FCBs was 0.38 percent and six of the nine banks experienced reduction in credit.

While overall deposit in the FCBs increased 1.56 percent, four of the banks witnessed reduction in deposit.

An official of an FCB said the overall picture of credit and deposit will become grimmer if the banks deduct the interest rates. “The latest figure is showing a bit of deposit growth, but if you deduct the interest rate there will be no growth at all,” he said.

The banking sector experts asked the government to carry out anti-corruption drives in a more orchestrated way so that genuine business people do not become panicked.

One official said the joint forces are raiding bank branches in an unplanned manner and in many cases asked details of some clients’ accounts. “Such moves obviously create panic,” he added.

“We are not against the drives against corruption, but the government should carry them out in a more well-planned and targeted way,” the official suggested adding that the government can seek account related information of clients by preparing a list of suspects instead of asking for all the clients’ bank statements.

Another official said there is a decrease in illegal income in recent days. “Many people deposit illegally earned money in the banks, such incomes either decreased or the bribe takers are not approaching the banks in fear of law enforcers’ watch on their accounts,” he said.