The Central Bank announced the Monetary Policy Statement for the second half of FY 2017-18 on January 29, 2018 in the wake of the banking sector’s acute inquisitiveness regarding new directives for lending. As the industry experts and economists labeled the MPS aptly as “Cautionary”, it sets a lukewarm tone for private sector lending. The private sector credit growth target set for H2, FY 18 is 16.8% which is modestly higher than that of last half (16.2%) and considerably lesser than the growth achieved in December’17 (18.13%). In another bid to tighten credit supply and enable banks to continue lending appropriate sectors, the Central Bank curtailed the Advance-Deposit Ratio (ADR) of conventional banks to 83.5% from 85% (89% IDR for Shariah based Islamic banks from 90%), in a separate circular. The new directive asserts that banks must show steady growth in deposit mobilization alongside lending, unlike the scenario till date. On another note, the effort of the Central Bank to curb excessive lending may have a bright impact on the mounting NPL trend. It is the time to discern how the banks maneuver the perfect deposit-lending portfolio mix aligning with the directions by Central Bank and still maintain the thriving growth of their profitability.
Like many other Asian countries, Bangladesh’s staple food is rice. There goes a universal saying for the Asian countries - undesirable fluctuation in rice price can make or break the agriculture/economic texture of the country. In 2017, Bangladesh, which is the world’s largest 4th rice producer, was hit by flash floods and waning stocks, resulting into soaring rice price. Retail prices of the coarse and medium quality rice, consumed by the majority of the population, ranged from BDT 44 to BDT 56 a kg from below BDT 40 range a year ago. In this context, it becomes tough for the commoners to afford such expensive daily intake. Simultaneously, import is also on rise, keeping in line with the deficiency in stock. Going forward, it will be a challenge for the country to meet its internal consumption demand of rice with smooth local production and intermittent on demand import amid fluctuating foreign exchange market and threat of natural calamity because of climate change.