Banks see slower growth

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Credit and deposit growth in commercial banks dropped 6.29 and 4.18 percentage points in 2007 compared with the year before due to high lending rate and inflationary pressure.

The banks witnessed a slower growth because of huge public demand for cash to cope with high inflation.

In a report to the government recently, Bangladesh Bank (BB) observed that high interest rate and political uncertainty throughout the year resulted in sluggish business activities and credit growth.

Both credit and deposit growth as a whole improved slightly at the end of 2007 despite a very unusual situation in the middle of the year, said a central bank official.

According to BB statistics, credit in commercial banks increased by 11.70 percent by the end of last year, while it was 17.99 percent in January-December of 2006. Deposit increased by 15.49 percent last year, compared to 19.69 percent the year before.

The central bank report said with inflationary pressure factored in, the interest rate against deposit was relatively low.

The BB official said the inflation rate last year was even higher considering the banks’ offer against deposit.

The anti-corruption drive was another factor contributing to slower credit and deposit growth. In some cases, people preferred having money in hand to depositing in banks.

Talking to The Daily Star, a top official of a private bank said a very few businessmen sought fresh big loans for new ventures.

Echoing the view, a state-run bank official said massive anti-graft measures had a negative impact on the overall business climate and so credit did not grow the way it was expected.

A high official of central bank said since the government is aiming to boost credit flow in agriculture and small and medium enterprises, the overall credit growth might improve.

BB data also shows that credit growth in state-owned commercial banks was almost nil in 2007. Credit disbursement in those banks decreased by 7.70 percent while in the preceding year it marked an increase of 6.54 percent.

Meanwhile, credit disbursement in private commercial banks increased by 22.59 percent in 2007, which was 27.02 percent in the previous year.

The BB also said credit in specialised banks rose by 6.73 percent as of December 2007 while it was 11.95 percent in the corresponding period a year before.

The picture however was different in the foreign commercial banks as their credit disbursement shot up by 30.64 percent. The figure was 24.59 percent in 2006.

The overall excess liquidity in the commercial banks stood at Tk 13,672 crore on December 31, 2007. Of that, the state-owned commercial banks had Tk 4,523 crore and private commercial banks Tk 7,007 crore.

According to BB statistics, deposits last year increased by 6.97 percent in state-owned commercial banks and 20.38 percent in private commercial banks. Deposit growth in the foreign commercial banks was 21.58 percent.

In 2006, it was 5.28 percent in state-run commercial banks, 30.65 percent in private commercial banks and 33.84 percent in the foreign commercial banks.

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