Banks grow cautious in lending | The Business Standard
Skip to main content
  • Home
  • Economy
    • Aviation
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
    • Book Review
    • Brands
    • Earth
    • Explorer
    • Fact Check
    • Family
    • Food
    • Game Reviews
    • Good Practices
    • Habitat
    • Humour
    • In Focus
    • Luxury
    • Mode
    • Panorama
    • Pursuit
    • Wealth
    • Wellbeing
    • Wheels
  • Epaper
    • GOVT. Ad
  • More
    • Subscribe
    • Videos
    • Thoughts
    • Splash
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • COVID-19
    • Games
    • Long Read
    • Interviews
    • Offbeat
    • Podcast
    • Quiz
    • Tech
    • Trial By Trivia
    • Magazine
  • বাংলা
The Business Standard

Sunday
May 28, 2023

Sign In
Subscribe
  • Home
  • Economy
    • Aviation
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
    • Book Review
    • Brands
    • Earth
    • Explorer
    • Fact Check
    • Family
    • Food
    • Game Reviews
    • Good Practices
    • Habitat
    • Humour
    • In Focus
    • Luxury
    • Mode
    • Panorama
    • Pursuit
    • Wealth
    • Wellbeing
    • Wheels
  • Epaper
    • GOVT. Ad
  • More
    • Subscribe
    • Videos
    • Thoughts
    • Splash
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • COVID-19
    • Games
    • Long Read
    • Interviews
    • Offbeat
    • Podcast
    • Quiz
    • Tech
    • Trial By Trivia
    • Magazine
  • বাংলা
SUNDAY, MAY 28, 2023
Banks grow cautious in lending

Economy

Jebun Nesa Alo
24 December, 2019, 11:25 pm
Last modified: 26 December, 2019, 12:39 pm

Related News

  • Banks vs banks: Suits rising, Tk16,000cr involved
  • Nobody trusts the banks now
  • Banks asked to keep 5% provision for off-balance sheet liabilities
  • Eid remittance falls due to low dollar rate
  • Banks to run from 10am to 5pm after Eid holidays

Banks grow cautious in lending

Banks’ reluctance to lend to productive sectors has already been apparent with April-June credit growth to the industrial sector slowing down to 10.39 percent from 46.46 percent in the same period last year

Jebun Nesa Alo
24 December, 2019, 11:25 pm
Last modified: 26 December, 2019, 12:39 pm

A move to enforce the single-digit interest rate has prompted commercial banks into lending cautiously and tightening scrutiny of loan proposals.

The Bangladesh Bank will issue a circular to force banks to implement the lending rate for the manufacturing sector from January 1. 

Though the intention of the move is to facilitate industrialisation by reducing the cost of business, it has yielded precisely opposite results as the banks turned their lending focus to unproductive sectors from manufacturing sector. 

The banks' reluctance to lend to productive sectors is already apparent, with the April-June credit growth to the industrial sector slowing down to 10.39 percent from 46.46 percent in the same period last year. 

However, loan growth in unproductive sectors saw a jump owing to an absence of any fixed lending rates. For instance, consumer loan growth surged to 8.71 percent in the April-June quarter, which was less than 1 percent in the same period last year. The figures come from data provided by the central bank. 

Bankers see the slow credit growth in a positive light, saying that it reflects the quality of lending. 

Private sector credit climbed to an abnormally high of 19 percent two years back due to aggressive lending, said Md Mehmood Husain, managing director of NRB Bank.

The pressure to enforce the single digit lending rate has made banks cautious in disbursing loans, which will also ensure quality lending, he noted. 

The banks are now focusing their lending on unproductive sectors like consumer loans and trade finance, said a top executive of a private bank. 

As there is no regulatory limit on lending to the manufacturing sector, the single digit will prompt banks into cutting their industrial loan portfolios, which will ultimately hurt industrialisation, said the banker on condition of anonymity. 

Economists fear that current private sector credit growth is not enough for achieving the ambitious economic growth of above 8 percent. 

The current 10 percent private sector credit growth is not good enough for achieving the expected economic growth because it is far below the central bank's monetary target, said Ahsan H Mansur, executive director of the Policy Research Institute.

The central bank in its monetary programme has set a private sector credit growth target of 13.20 percent for December. 

Though the single digit is yet to be fully implemented, banks went for a change in their approach to lending following the government's instructions to them since April last year to bring down the lending rate below the double digit. 

The private sector has already been feeling the pinch of a single digit interest rate as credit growth has maintained a downtrend for the last two years. 

In November 2017, private sector credit growth rose to a peak of 19 percent due to aggressive lending by banks. The abnormal rise in credit growth prompted Bangladesh Bank to rein in credit growth by cutting down the advance deposit ratio last year. The central bank's firm move slowed down credit inflow to the private sector, which continued throughout last year. 

In such a situation, Finance Minister AHM Mustafa Kamal, soon after taking office in January this year, pressurised the commercial banks to implement the single digit interest rate to reduce default loans. 

The pressure for implementing the single digit prompted the banks to go slow on a disbursement of loans, causing a historic fall in private sector credit growth to 10 percent in October. 

Private sector credit growth could deteriorate further in November, coming down to the single digit. 

The slow credit growth piled up excess liquidity in the banking system. Just a year back, banks went through a crunch period, with little money to lend. But now their money in the vaults has ballooned to Tk90,000 crore.

Top News / Banking

Banks / lending

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Prime Minister Sheikh Hasina. TBS Sketch.
    PM Hasina credits peaceful democratic atmosphere for country's massive progress
  • 8th FYP: Why allocate more for transport and less for health, education?
    8th FYP: Why allocate more for transport and less for health, education?
  • Indian Foreign Minister Subrahmanyam Jaishankar attends a news conference following talks with his Russian counterpart Sergei Lavrov in Moscow, Russia, November 8, 2022. Maxim Shipenkov/Pool via REUTERS
    'India facing complicated challenges from China', says Jaishankar

MOST VIEWED

  • Nagad builds hope on Tk510cr bond, incurs Tk625cr loss
    Nagad builds hope on Tk510cr bond, incurs Tk625cr loss
  • Six more services to need proof of tax return
    Six more services to need proof of tax return
  • Photo: BSS
    Saudi offers large scale investment in Bangladesh
  • No currency swap, partial trade with India now in rupee only
    No currency swap, partial trade with India now in rupee only
  • Photo: TBS
    Forex crisis eases considerably but not resolved: Top bankers
  • 44 industrialists to be honoured with CIP status on Monday
    44 industrialists to be honoured with CIP status on Monday

Related News

  • Banks vs banks: Suits rising, Tk16,000cr involved
  • Nobody trusts the banks now
  • Banks asked to keep 5% provision for off-balance sheet liabilities
  • Eid remittance falls due to low dollar rate
  • Banks to run from 10am to 5pm after Eid holidays

Features

Unwinding poolside, she revels in self-care, her flawless complexion glowing under the gentle sun. Photo: Rony Rezaul. Model: Tangia Zaman Methila

Dive into Summer Style: Get Ready to Sizzle by the Pool

3h | Mode
Illustration: TBS

'Cybercriminals are creating new ways of hacking'

4h | Panorama
Under SmartMek’s package, farmers can have access to large agricultural machines such as combined harvesters.
Photo: TBS

SmartMek: Providing digitised services to the farmers through smart cards

5h | Panorama
Illustration: Bloomberg

AI will supercharge productivity. Will workers benefit?

4h | Panorama

More Videos from TBS

Temperature will surpass 1.5 degree by 2027

Temperature will surpass 1.5 degree by 2027

4h | TBS World
Dubai’s gigantic moon shaped mega resort

Dubai’s gigantic moon shaped mega resort

22h | TBS World
In an interview given to TBS Lt. Col. Mohammad Tajul Islam Chowdhury

In an interview given to TBS Lt. Col. Mohammad Tajul Islam Chowdhury

2d | TBS Stories
New US visa policy introduced to promote free and fair elections in Bangladesh

New US visa policy introduced to promote free and fair elections in Bangladesh

2d | TBS Today

Most Read

1
End of zero tax!
NBR

End of zero tax!

2
Photo: TBS
Energy

Wind power feeds national grid for first time Friday

3
Photo: TBS
Bangladesh

Private helicopter service launched in Ctg

4
Malaysian ship docks at Mongla port with 926 luxurious cars
Bangladesh

Malaysian ship docks at Mongla port with 926 luxurious cars

5
Nagad builds hope on Tk510cr bond, incurs Tk625cr loss
Economy

Nagad builds hope on Tk510cr bond, incurs Tk625cr loss

6
Cenbank prints Tk70,000cr new money in 11 months to support nat'l budget
Budget

Cenbank prints Tk70,000cr new money in 11 months to support nat'l budget

EMAIL US
[email protected]
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Privacy Policy
  • Comment Policy
Copyright © 2023
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - [email protected]

For advertisement- [email protected]