Pvt Sector credit growth at historical low of 6.03pc
Business Report :
The country’s private sector credit growth plummeted to an all-time low of 6.03 percent in January, as prolonged political instability and a high-interest-rate regime forced businesses to stall expansion plans and led banks to adopt a highly cautious lending stance.
According to the latest data from the Bangladesh Bank, credit growth edged down from 6.1 percent in December, continuing a sharp decline from the 10.13 per cent recorded in July 2024.
Although a brief spike to 6.58 percent occurred in November, analysts attribute this to loan restructuring ahead of the 12 February national election rather than genuine new investment in productive sectors.
The central bank’s monetary policy statement for January-June 2026 said ‘Tight monetary conditions, increasing borrowing needs to finance the budget deficit and subdued credit demand amid persistent uncertainty in undertaking new investment have pushed private-sector credit growth to historically low levels.’
After a brief rise to 6.58 per cent in November from 6.23 per cent in October, the downward trend resumed. The November increase was largely driven by loan rescheduling and restructuring ahead of the February 12 national election rather than new lending to productive sectors.
The decline has been gradual but persistent. Growth stood at 6.29 per cent in September, 6.35 per cent in August, 6.52 per cent in July, 6.40 per cent in June, 7.17 per cent in May and 7.5 per cent in April.
In July 2024, it was 10.13 per cent before sliding sharply after the political transition in August 2024.
Economists said that the slowdown reflects a mix of political instability, weak business confidence and structural weaknesses in banks.
Many businesses delayed investment decisions while waiting for policy clarity and a stable political environment. The Bangladesh Nationalist Party (BNP) secured a landslide victory in the national election held on February 12.
One key factor has been crowding out by government borrowing.
During July-December of FY26, net credit to the government from the banking system reached Tk 50,782 crore, equivalent to 43 per cent of the revised annual target of Tk 1,18,000 crore.
Net credit to the government rose 32.8 per cent by December 2025. When banks lend more to the government, fewer funds remain available for private borrowers, particularly in a tight liquidity environment.
Banks are also grappling with rising non-performing loans.
Defaulted loans climbed to a record Tk 6.44 lakh crore at the end of September 2025, accounting for about one-third of total outstanding loans.
High default levels erode bank capital, increase provisioning requirements and make lenders more cautious about approving new loans.
Liquidity pressures and weak deposit growth have compounded the problem.
To contain inflation, the central bank raised its policy rate to 10 per cent, pushing commercial lending rates close to 15 per cent. Such borrowing costs have discouraged businesses, especially small and medium enterprises, from taking fresh loans.
The impact of weak credit growth is visible across the economy. Imports of capital machinery have fallen, signalling slower industrial expansion. Lower investment has reduced money circulation, and many factories are operating below capacity. Consumer demand remains soft, and private sector job creation has slowed.
The central bank had targeted 9.8 per cent private sector credit growth for July-December 2025, but the actual outcome fell far short of that goal.
Experts said that if credit expansion remains weak, industrial output could decline further, private investment may remain stalled and employment recovery could be delayed.
