Private credit growth dips below 7pc for 7 months straight

Business Report :

Private sector credit growth in Bangladesh remains below 7 percent for the seven consecutive months starting from June last year reflected a combination of political instability, structural weaknesses in the banking system and weakening business confidence.

Last month, business credit growth dropped to 6.10 percent, down from 6.58 percent in November, according to the recent Bangladesh Bank data.

Alarmingly, since 2003 the central bank data published data in this regard – the private credit growth had never fallen this low.

Private sector credit growth rose slightly to 6.58 per cent in November 2025 from 6.23 per cent in October, largely due to increased loan rescheduling and restructuring ahead of the election rather than new lending to productive sectors.

Bangladesh Bank figures showed a steady decline over recent months, with growth 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.

The slowdown began early in 2024 and intensified after the political transition in August that year.
Credit growth stood at 10.13 per cent in July 2024 but continued to fall in the following months.

Bankers said that many firms are now taking a wait-and-see approach ahead of the February 2026 election, sharply reducing demand for fresh loans.

At the same time, banks face tight liquidity, rising loan defaults and weak depositor confidence, which have constrained their ability to extend credit.

The impact of weak credit growth has already spread across the economy.
Imports of capital machinery have declined, slowing industrial expansion. Lower investment has reduced money circulation, while many factories are running below capacity.

Consumer spending remains subdued, and entrepreneurs remain reluctant to borrow amid market volatility.
The central bank had set a private sector credit growth target of 9.8 per cent for July-December 2025, but the actual outcome fell far short.

Analysts warned that a prolonged slowdown could further weaken industrial output, curb private investment and delay job recovery.

Bangladesh Bank raised its policy rate to 10 per cent to curb inflation, pushing commercial lending rates close to 15 per cent.

Bangladesh Bank said in its July-December 2025 policy that several factors may have slowed credit demand, including weaker borrowing from non-bank deposit corporations and other financial sectors amid ongoing uncertainties in the country, as well as the impact of a contractionary monetary policy.