Private credit growth rises to 4.62pc in July

Private-sector credit growth rose to 4.62 per cent in July, up from 4.47 per cent in June, but the small improvement still shows that bank lending to businesses remains weak.

The 0.15 percentage-point rise came after private credit growth hit a 33-year low in June. But July's growth was still far below the level seen a year earlier, keeping pressure on banks and policymakers to revive private investment and lending.

The latest Bangladesh Bank data show that private-sector credit growth was around 6.5 per cent in July last year. This means the growth rate has fallen by nearly 2 percentage points over the past year.

The July figure is also well below Bangladesh Bank's medium-term target of 6.8 per cent, leaving a gap of more than 2 percentage points.

The weakness becomes clearer when credit is compared with bank deposits.

Bank deposits continued to grow at a much faster pace, while private-sector borrowing remained sluggish. 

This suggests that banks have liquidity to lend, but businesses are still cautious about taking new loans.

Bankers said weak investment demand, economic uncertainty, high interest costs and the growing burden of default loans are making both borrowers and lenders cautious.

The June data had already shown the pressure. Private-sector credit growth dropped to 4.47 per cent, the lowest level in more than three decades.