Industrial credit rises 22% in FY22 on higher import costs
Credit flow to the industrial sector has registered a 22% jump year-on-year in FY22, riding on high import costs and rising dollar prices.
In the last fiscal year, banks and non-bank financial institutions disbursed Tk4,81,517 crore in loans to the industrial sector, while the disbursal was Tk3,74719 crore in FY21, according to the central bank's industrial quarterly report.
Bankers have mainly linked this healthy credit growth to imports of capital machinery and other goods at higher costs because of soaring global prices and continuous gain of dollars against taka.
The lending rate is still capped at 9% for banks although the central bank has raised the repurchase agreement (repo) rate to 5.5% to control inflation. That is why customers are availing bank loans at lower rates, leading to a rise in disbursements to the industrial sector, they say.
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The central bank report shows that in the second quarter (April-June) of this year, disbursements to the CMSME sector stood at Tk56,484 crore, up by 35% from the amount in the same period last year.
Besides, lending in the April-June quarter increased by 9% compared with the January-March quarter.
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank Limited, told The Business Standard that lending rate has not been raised despite a rise in the central bank's policy rate to keep private sector's activities afloat, causing credit flow to the private sector to grow further.
The private sector has gone for more bank loans as they are now having to settle deferred LC payments, he said.
In the meantime, inflation rose to 7.56% in June because of high import costs following continuous gains of dollars against taka.
In the last month of FY22, the private sector credit growth jumped to 13.66%, the highest in the last 45 months, mainly backed by soaring import payments.
As part of tightening money flow amid soaring inflation, the private sector credit growth ceiling was cut to 14.1% for FY23 from 14.8% of FY22, according to the monetary policy statement for the current fiscal year.
Yet, in July, the first month of the current fiscal year, the credit flow rose to 13.95% in July, which was close to the monetary ceiling set for the current fiscal year.
In the last fiscal year, the country's import payments rose by nearly 36% to $82.49 billion, marking a sharp increase since the second wave of the pandemic, while export receipts amounted to $49.25 billion. In FY22, trade deficits stood at $33.24 billion.
