Banks' credit growth still lumbering

Posted by BankInfo on Tue, Jul 08 2014 11:32 am

Banks' credit growth continues to stutter despite the diffusion of political tension in January as banks exercise caution in lending to avoid bad loans.
As of May 15, the sector's overall credit growth from a year ago stood at 8.97 percent, according to central bank statistics.
The private banks' credit increased 14.07 percent, with some recording 20 percent to 38 percent growth.
But state banks saw their credit decline 5.11 percent and foreign banks 0.22 percent. Among the four state banks, Rupali's credit increased significantly, while the other three saw a fall.
Due to various corruptions including the Hall-Mark scam, the loan flow of state-owned banks has stalled, said Khondker Ibrahim Khaled, a former central bank deputy governor.
“The bank officials in general are in fear of giving out fresh loans,” he said.
However, Khaled said fresh loans have not completely stopped at state banks thanks to persuasion by influential quarters.
“Because of this the default loans of state banks are still on the rise—the central bank and the finance ministry need to take strict measure against this persuasion culture.”
Of the foreign banks, Standard Chartered Bank and HSBC saw their credit grow slightly.
However, most of the banks saw their deposits swell during the period, which squeezed their profits. As of May 15, overall deposit grew 16.48 percent year-on-year.
In a bid to maintain profit levels and log in high credit growth, many banks went for aggressive lending to rework the excess liquidity, according to Khaled.
“But banks that follow conservative banking have not yet gone for aggressive lending as uncertainty still looms over the business environment.”
Helal Ahmed Chowdhury, managing director of Pubali Bank, said loan growth of some banks are slow as they are exercising due diligence in sanctioning loan proposals.
Also the vice-chairman of the Association of Banks Bangladesh, Chowdhury said every bank must avoid aggressive lending to avert bad lending, while citing the huge amount of loans that have become defaults in Chittagong after the banks aggressively lent through Loan against Trust Receipt.

News:The Daily Star/8-July-2014
Posted in Banking, News

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