Key Takeaways
- • Private sector credit growth in Bangladesh fell to a record low of 4.17 per cent in September, down from 4.75 per cent in August, the lowest reading since Bangladesh Bank began compiling the data in 2003, according to New Age.
- • Private credit growth was 10.13 per cent in July 2024 and has declined steadily, dropping below 6 per cent after February 2026 and remaining well below the central bank's 6.8 per cent December target.
- • Commercial lending rates remain around 14 per cent despite a 50 basis point policy rate cut to 9.5 per cent in July, keeping borrowing costs elevated for businesses.
- • Defaulted loans reached Tk 6.08 lakh crore at the end of June, nearly one-third of total outstanding loans, while total distressed assets are estimated at about Tk 11 lakh crore, constraining bank lending capacity.
- • Government borrowing from the banking system reached about Tk 48,000 crore in July-October, absorbing roughly 43 per cent of its Tk 1.12 lakh crore annual target in four months and competing with private borrowers for funds.
Summary
Private sector credit growth in Bangladesh fell to a record low of 4.17 per cent in September, according to Bangladesh Bank data cited by New Age. The reading is the lowest since the central bank began compiling the series in 2003 and signals that businesses are borrowing far less for new investment, factory expansion and working capital, bank officials said. The figure follows declines from 4.75 per cent in August, 4.62 per cent in July, 4.47 per cent in June and 4.98 per cent in May. Growth was above 6 per cent before February 2026 and above 7 per cent before May 2025.
Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue, said businesses have little reason to expand while facing energy shortages, high inflation and expensive borrowing. He said persistently high inflation has prevented a meaningful reduction in interest rates, and that government and central bank programs offering lower-cost loans have been slow to implement. He warned that a prolonged Middle East crisis could keep global oil prices elevated and weigh on employment and remittances from Gulf countries, and urged the government to address domestic constraints and support private investment.
Bank balance sheets are also constraining lending. Defaulted loans reached Tk 6.08 lakh crore at the end of June, nearly one-third of total outstanding loans, and distressed loans including other troubled assets are estimated at around Tk 11 lakh crore. Bankers said higher provisioning against potential losses reduces funds available for fresh lending and makes lenders more cautious. Energy shortages have forced some factories to run below capacity and raised production costs, while uncertainty over the Middle East crisis has encouraged a wait-and-see approach among businesses. Weak imports of capital machinery point to reduced appetite for expanding capacity, according to financial experts.
Monetary policy has not yet translated into cheaper credit. The central bank cut its policy rate by 50 basis points to 9.5 per cent in July, but commercial lending rates remain around 14 per cent. The central bank has observed that banks are increasingly parking surplus funds in government securities rather than lending to the private sector. Bangladesh Bank has set a private-sector credit growth target of 6.8 per cent by December, well above September's level. Meanwhile, the government borrowed around Tk 48,000 crore from the banking system in July-October, about 43 per cent of its Tk 1.12 lakh crore full-year borrowing target, adding competition for funds. Experts warned that a prolonged slowdown could constrain growth, jobs and household incomes even as government spending and borrowing rise.
Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue, said businesses have little reason to expand while facing energy shortages, high inflation and expensive borrowing. He said persistently high inflation has prevented a meaningful reduction in interest rates, and that government and central bank programs offering lower-cost loans have been slow to implement. He warned that a prolonged Middle East crisis could keep global oil prices elevated and weigh on employment and remittances from Gulf countries, and urged the government to address domestic constraints and support private investment.
Bank balance sheets are also constraining lending. Defaulted loans reached Tk 6.08 lakh crore at the end of June, nearly one-third of total outstanding loans, and distressed loans including other troubled assets are estimated at around Tk 11 lakh crore. Bankers said higher provisioning against potential losses reduces funds available for fresh lending and makes lenders more cautious. Energy shortages have forced some factories to run below capacity and raised production costs, while uncertainty over the Middle East crisis has encouraged a wait-and-see approach among businesses. Weak imports of capital machinery point to reduced appetite for expanding capacity, according to financial experts.
Monetary policy has not yet translated into cheaper credit. The central bank cut its policy rate by 50 basis points to 9.5 per cent in July, but commercial lending rates remain around 14 per cent. The central bank has observed that banks are increasingly parking surplus funds in government securities rather than lending to the private sector. Bangladesh Bank has set a private-sector credit growth target of 6.8 per cent by December, well above September's level. Meanwhile, the government borrowed around Tk 48,000 crore from the banking system in July-October, about 43 per cent of its Tk 1.12 lakh crore full-year borrowing target, adding competition for funds. Experts warned that a prolonged slowdown could constrain growth, jobs and household incomes even as government spending and borrowing rise.
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