The expansion of credit flow to the private sector witnessed a rising trend in February 2012, following increased trade financing, after facing fall in the past few months, bankers said.

The rate of private sector credit growth rose to 19.55 per cent in February from 18.94 per cent in January, according to the central bank statistics, released Thursday.

"It's a temporary phenomenon," a senior official of the Bangladesh Bank (BB) told the FE, adding that the private sector credit growth has already recorded a declining trend in March.

The credit flow to the private sector rose to Tk 622.29 billion in February 2012 on a year-on-year basis from Tk 702.79 billion in the corresponding month of the previous year, the BB data showed.

Bankers, however, said the credit growth to the private sector increased slightly during the period under review, mainly due to the rise in trade financing, particularly for scrap-vessels.

"Higher import of scrap-vessels has pushed the credit flow to the private sector to some extent in February last," a senior official of a leading private commercial bank (PCB) told the FE.

The import orders for scrap-vessels increased by 123 per cent to $134.49 million in February 2012 from $60.26 million in January 2012, while the letters of credit (LCs) against imports worth $66.82 million were settled in February against $83.28 million in January. 

The private banker also said the credit flow to the private sector may fall in the coming months, as most banks are not interested to open LCs for less important products, like consumer and luxurious goods, in line with the central bank's advice.

The BB earlier asked the commercial banks to discourage extending credits to less productive sectors for reining in the inflationary pressures on the economy.

The central bank unveiled a 'restrained' monetary policy on January 26, aiming to bring down inflation to a single-digit from the current level of over 10 per cent through discouraging credit flow to unproductive sectors.

Financial Express/Bangladesh/ 6th April 2012