DHAKA, July 18: Bangladesh Bank on Wednesday announced a new monetary policy for July-December period focusing on curbing inflationary pressure, adequate credit supply to private sector to stimulate inclusive growth.

The central bank targeted private sector credit growth at 18.3 percent for the second half of the current year in its monetary policy, which was 16 percent in June last.

The new policy will continue to encourage credit to productive sectors and discourage it to unproductive ones.

“We’ve adopted such a monetary policy that suits the present time,” central bank governor Dr Atiur Rahman told reporters while responding to queries from reporters after the announcement of the new monetary policy at Jahangir Alam Conference Hall at the BB office.

He also said there is no measure in the monetary policy that will have a negative impact on the country’s capital market.
 
Senior consultant and adviser to the governor M Allah Malik Kazemi, senior economic adviser Dr Hasan Zaman, Shitangshu Kumar Sur Chowdhury and Nazneen Sultana were present.

The policy statement says, “This monetary policy stance also aims to preserve the country’s prevailing external sector stability.”

In light of the subdued outlook for global trade, the central bank expects a modest growth in foreign reserve in FY13. “BB will continue to support a market-based exchange rate while seeking to avoid excessive foreign exchange rate volatility.”

The monetary policy statement says the central bank will continue to focus on the quality/composition of private sector credit and on interest rate spreads.  “BB will aim to ensure that the composition of this credit is focused on productive sectors with an envisaged reduction in the share of consumer credit.”

SME and agricultural credit are expected to take a larger share of the loan portfolios of the banking sector in order to promote financial inclusion, it said.

Closer bank supervision and inspection will also ensure that single borrower exposure limits are not exceeded so that the distribution of this private sector credit growth remains broad-based across the spectrum of different industry sizes.

Besides, interest rate spreads will be closely monitored and publicly disclosed on BB’s website in order to promote a more competitive banking sector.

“We’ll continue to pressurise to cut the spreads, especially on those banks whose spread is indecent. The spread between deposits and lending interests came down to 5.45 percent from 5.58 percent,” BB governor Atiur said.

Deputy Governor SK Sur Chowdhury said the banks have been directed to keep the spread below 5 percent. “We’re monitoring it. We want to bring it down below 5 percent.”

The statement said specifically BB’s monetary program for FY13 aims to contain reserve money growth to 14.5 percent and broad money growth to 16 percent by December 2012.

New loan classification and provisioning guidelines which banks will have to implement by the fist half of the fiscal year 2012-13, will reduce asset liability mismatch, bring loan classification and provisioning to international standards and strengthen financial soundness of individual banks.