A file photo shows an employee taking rest at a leisure period at a garment factory in Dhaka. The credit growth in the private sector declined sharply in the just concluded financial year compared with that of the previous financial year. — New Age photo

The credit growth in the private sector declined sharply in the just concluded financial year compared with that of the previous financial year due to a tight monetary policy taken by the Bangladesh Bank, declining trend of the country’s import payment and liquidity crisis in the banking sector, BB officials said.
According to the BB data released last week, the credit growth in the private sector decreased to 19.68 per cent in FY 2011-12 from that of 25.84 per cent in FY 2010-11.
Banks and non-bank financial institutions disbursed Tk 4,07,771.10 crore in FY12 and Tk 3,40,712.70 crore in FY11 to the private sector.
In FY 2009-10, the private sector got Tk 2,70,760.8 crore in credits.
In FY10, the credit growth in the private sector was 24.24 per cent, according to the BB data.
A BB official told New Age that the credit growth in FY12 had declined significantly as the central bank had maintained contractionary monetary policy for July-December of 2011 and January to June of 2012 to control the inflationary pressure on the economy.
Under the monetary programme for January-June of 2012, the credit growth rates to the public and the private sectors were set at 31 per cent and 16 per cent respectively.
The credit growth rates in the public and the private sectors achieved up to December, 2011 were 62 per cent and 18 per cent respectively.
As part of the contractionary monetary policy, the BB increased the repurchase agreement rate to 7.75 per cent from 7.25 per cent from January 2 this year.
Moreover, the BB has been providing money to commercial banks through special repo with interest rate of 10.75 per cent as it did not allow any money through repo since 22 December in 2011.
Under the circumstances, the liquidity crisis in the commercial banks turned severe, said the BB official.
Due to a dollar shortage and liquidity crisis in the financial sector, the settlement of letters of credit or import payment drastically fell in FY12, he said.
BB data showed that import bill payment growth in FY12 declined to 8.95 per cent to $34.81 billion on year-on-year basis compared to that of 38.61 per cent growth to $31.95 billion in FY11 year-on-year.
In FY12, the overall opening of LCs also registered a negative growth of 4.01 per cent compared to that of 34.04 per cent in FY11.
BB data showed that LC opening in FY12 had stood at $37.03 billion against $38.58 billion in FY11.
Another BB official said the overall import growth in FY12 had drastically decreased due to lower import of food grains, capital machinery and industrial raw materials.
He said banks and NBFIs had faced difficulty to disburse loans to the industrial sector due to liquidity crisis which had already reflected in a significant reduction in growth in the industrial loan disbursement.
BB data showed that disbursement of the industrial loans by banks and NBFIs had increased by 4.55 per cent in July-March of FY12 whereas the loan disbursement rose by 27.07 per cent in the same period of the FY11.
Banks and NBFIs disbursed Tk 81,253 crore as industrial loans in the period against Tk 77,720 crore in the first nine months of FY11. The total loan disbursement in July-March of FY10 was Tk 61,165 crore.
For these reasons, the overall credit flow to the private sector significantly declined in FY12, the official said.
He, however, said it was a positive trend that the public including the government sector credit growth in FY12 had decreased considerably.
BB data showed the public including the government sector credit growth in FY12 was 18.68 per cent to Tk 1,10,150.6 crore on year-on-year basis compared to that of 33.63 per cent to Tk 92,813.2 crore in FY 11. 
So, the private sector may get more loans from the banking source in the coming months, he added.