Bangladesh Bank (BB) on Monday announced its Monetary Policy Statement (MPS) for the second half (H2) of the financial year 2017-18 (FY18) projecting the private sector credit growth rate at 16.8 percent, which was 16.3 percent in the H1.
"In one word, the new monetary policy is employment forecast growth with stability," BB Governor Fazle Kabir said, announcing the monetary policy for January to June 2018 at a press conference held at the central bank here.
He noted that the MPS, like previous ones, has been prepared after having discussions with a large number of stakeholders to get the latest pulse of the economy, and incorporated their views on the economic constraints and outlook in designing a forward looking monetary policy stance.
Fazle Kabir said the monetary programme retains domestic credit growth ceiling unchanged at 15.8 percent, adequate to accommodate the targeted 7.4 real GDP growth with up to 6 percent annual average inflation.
"Continued negative trend of government's bank borrowing is projected to leave room for higher 16.8 percent FY18 private sector credit growth, against previous projection of 16.3 percent," he added.
In the MPS, repo and reverse repo policy interest rates will for the time being be left unchanged at 6.75 and 4.75 percent respectively, he said, adding, "Reserve Money (RM) growth and its attendant inflationary impact will remain moderate in H2 FY18, aided by the government's likely negative or small bank borrowing, expected near-zero Net Foreign Assets (NFA) growth due to high import payment outflows will result in moderation in broad money growth to 13.3 percent, against the earlier projection of 13.9 percent.
Fazle Kabir said macro-prudential steps to curb imprudent unproductive lending would include closer surveillance on adherence to prescribed Asset Liability Management (ALM) and Froex Risk Management guidelines, a new a new directive requiring banks to rationalize their Advance DepositRatio (ADR) to curb their over-exuberance in lending, stricter end use surveillance on bank loans including import financing commitments.
"Banks are encouraged to avoid unduly high medium or ling-term investment financing exposures to corporate bond issuance in the capital markets, using banks only as interim bridge financing windows," he added.
Responding to a question, the governor said, banks will get time up to June to take a preparation for the upcoming guidelines of ADR. "If banks can increase their deposit rate and give quality credit, they will not face any problems for the upcoming guideline," he added.
Fazle Kabir said the ongoing gradual depreciation of Taka against USD, coupled with the depreciation of USD itself against other major currencies is enhancing export competitiveness and workers' remittance inflows, helping limit Balance of Payment (BOP) current account deficit.
He said the preventive and punitive steps, through the BB, against the abuse of mobile phone accounts in illegal 'hundi' operations are also shoring up banking channel remittance inflows.
He mentioned that ongoing efforts of getting banks more engaged in mobilizing foreign savings of Non-resident Bangladeshis (NRBs) by sales of government's high yielding wage earners bonds and handling their portfolio investments with Non-resident Investment Taka Accounts (NITAs) for NRBswill help further augment foreign exchange inflow, simultanher simplifying banking channel transaction procedures relating to exports of eously adding equivalent Taka liquidity in the financial and capital market .
"Works underway on furtgoods and services through internet-based e-commerce platforms will also help further in augmenting forex inflows," he added.-BSS