Private-sector credit growth dropped significantly in May mainly due to the ongoing second wave of the Covid-19 pandemic in Bangladesh, according to bankers.
Credit flow fell to 7.55 per cent in May 2021 on a year-on-year basis, from 8.29 per cent a month ago, disclosed the latest Bangladesh Bank (BB) statistics.
The growth was 8.79 per cent in March 2021. It was 7.25 percentage points lower than the central bank's target of 14.80 per cent for the second half (H2) of fiscal year (FY) 2020-21.
Higher viral infections along with deepening uncertainty pushed down the credit growth in the past couple of months, senior bankers observed.
The existing trend might continue until the pandemic-induced uncertainty is overcome, they predicted.
"Private-sector credit growth may not touch double-digit mark by the end of 2021," said Syed Mahbubur Rahman, former chairman of the Association of Bankers, Bangladesh, while explaining this trend.
Mr Rahman, also managing director (MD) and chief executive officer (CEO) of Mutual Trust Bank Limited, said banks were mainly financing the apparel and clothing sector, pharmaceuticals and consumer items.
"Most of the businessmen are now following a wait-and-see policy for expanding businesses to avoid financial risks," said Emranul Huq, MD and CEO of Dhaka Bank Limited, in reply to a query.
Domestic demand has decelerated in recent months amid the pandemic, he told the FE.
"Consumption patterns as well as lifestyle have changed following the nationwide lockdown to curb coronavirus infections," the senior banker explained.
As the number of Covid-19 cases has continued to rise alarmingly since mid-March, the government imposed a nationwide lockdown for a week from April 05 to curb infections.
Later, the lockdown was extended several times on the same ground.
When contacted, a senior BB official told the FE that the amount of the private sector credit has increased in recent months, but with a declining trend.
Meanwhile, outstanding loans with the private sector rose to Tk 11,718.09 billion in May from Tk 10,895.58 billion a year ago.
It was Tk 10,972.68 billion in June 2020.
"Lower demand for credit due to the pandemic has pushed down private-sector credit growth in recent months," the central banker said while explaining the issue.
He said private-sector credit growth would depend on both the domestic and global pandemic situation.
Most of the banks have recently maintained a cautious stance on the delivery of fresh loans to different sectors in order to avoid any future risk, another central banker said while replying to a query.