B Mirror Desk : The decline in private sector credit growth that started after the coup in July has shown some fluctuations but remains on a downward trajectory. In March, credit growth saw a slight increase to 7.57 percent, up from 6.82 percent in February. Data released by Bangladesh Bank on Thursday indicates that private sector credit growth has been below 8 percent for five consecutive months. In January, the growth rate was recorded at 7.15 percent.

Although there was a notable increase of 10.13 percent in July, coinciding with the onset of the movement, it dropped to 9.86 percent in August, the month the government fell. The following month, September, saw a further decline to 9.20 percent, marking the lowest rate in three years. This downward trend continued, decreasing to 8.30 percent in October and further to 7.66 percent in November. By December of the previous year, private sector credit growth had decreased to 7.28 percent.

The Bangladesh Bank has been tracking private credit growth since January 2015. Notably, in May 2021, during the Covid pandemic, credit flow to the private sector had also dipped to 7.55 percent. The central bank reported a 28.68 percent decrease in the opening of letters of credit for importing capital equipment during the first nine months of the current fiscal year compared to the previous fiscal year 2023-24. Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank (MTB), commented, ‘The overall economic situation is unstable, leading to low investment levels at this time. Consequently, there is less demand for bank loans among business owners due to limited business expansion.’

He stated, “Business leaders are asserting that the interest rates on bank loans are excessively high, which is why they are reluctant to borrow from banks.” The growth of credit has already dipped below the target set by the central bank to limit the money supply in the market as a measure against inflation.

In accordance with the contractionary policy, the monetary policy for the first half of the current fiscal year has lowered the credit growth target from 10 percent to 9.80 percent. In February, Bangladesh Bank Governor Ahsan H. Mansur informed reporters on the day of the monetary policy announcement that the policy interest rate would remain at 10 percent until inflation decreases. Should inflation decline, the policy interest rate would be adjusted downward.