Credit growth in commercial banks decreased by 8.01 percentage points in the first 10 months of2007 compared with the corresponding period of 2006 despite having over Tk 14,000 crore surplus liquidity in the banks.

The Bangladesh Bank (BB) statistics show that deposit in the banks also declined by 4.19 percentage points during the period.

Decrease in disbursement of big loans last year is the reason for declining credit growth. BB Governor Salehuddin Ahmed said yesterday.

He. however, noted that loan disbursement in agriculture and small and medium enterprises (SME) sectors increased in 2007.

The central bank governor was talking to the reporters at his office.

Banking sector sources, however, blamed a panicky situation resulted from the government's anti-corruption drives from the beginning of2007, for the declining

trend in both credit and deposit growth in the banks.

"The situation was worst in the middle of the year when we witnessed negative credit growth," said an official of a commercial bank. He, however, observed that the situation was improving at the end of the year 2007.

Research Director of Bangladesh Institute of Development Studies (BIDS) Zaid Bakht believes that to break the stagnant situation of macro economy by paving the way for long term investment poses a big challenge for the government in the new year.

Speaking on the country's overall economic situation, BB Governor Salehuddin Ahmed observed that restoring full confidence of the businessmen is a big challenge in 2008.

“The government has taken several steps to recover business sector confidence and formation of better business forum is part of the process," he said adding, "we are

hopeful that business sector will work confidently in 2008."

The BB data shows that in the July-October period of the current fiscal year, import of capital machinery decreased by 8.33 percent, which illustrates the declining trend in investment.

"There were hardly any expansion plans by the big business groups of the country last year and we did not see any take out of big loans by any business group," said a top official of a private commercial bank.

According to the BB data, credit in commercial banks increased by 5.37 percent during January-October 2007 period whereas In the first 10 months of 2006, credit growth in banks was 13.38 percent.

The data also shows that there was no credit growth in government owned commercial banks (Sonali, Agrani and Janata banks) from December 31, 2006 to November 1, 2007; rather credit disbursement of these banks

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decreased by 13.25 percent.

Credit disbursement of government owned commercial banks increased 4.1 percent in the first 10 months of2006.

Meanwhile, credit disbursement of private commercial banks increased 15.49 percent in first 10 months of 2007, which was 20.88 percent in 2006.

The BB data also reveals that credit of specialised banks increased 4.30 percent in the first 10 months of 2007 while the increase was9.97 percent in 2006.

The picture, however, was different in die foreign commercial banks as the banks' credit disbursement increased 21.73 percent in the first 10 months of2007. The figure was 14.80 percent in the corresponding period of2006.

The overall excess liquidity in the commercial banks stood atTk 14,239 crore on November 1,2007.

Of the excess liquidity, the government owned commercial banks haveTk3,758 crore, private commercial banks Tk 7.345 crore, foreign commercial banksTk2,978 crore and specialised banks Tk 157 crore surplusliquidity.

According to the BB statistics, deposit in commercial banks increased 10.50 percent in the first 10 months of 2007, which was. 14.69 percent in the same period of2006.