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Tuesday | October 13, 2026 | Dhaka

Private credit recovery remains elusive

Lending expands by just 4.75pc despite a 12pc rise in deposits
 Staff Reporter
 Published: 12:56 AM, 13 October 2026

The country’s private sector credit growth slowed to 4.75 per cent in August 2026, despite a strong rise in bank deposits, highlighting the weakness in business borrowing and the limited flow of banking-sector liquidity into private investment.

Deposits in the banking sector rose by 12 per cent year-on-year to Tk 21.31 lakh crore in August, while private sector credit reached Tk 18.30 lakh crore, according to the Economic Update & Outlook September 2026 report prepared by the General Economics Division (GED) of the Bangladesh Planning Commission.

The report said deposit growth had accelerated from 10.01 per cent in August 2025, indicating stronger deposit mobilisation and a possible recovery in depositor confidence.

“This is faster than the 10.01 percent growth recorded a year earlier, so deposit collection has gained momentum,” the report said.

“It suggests that liquidity in the banking system has improved and that depositors’ confidence is recovering,” it added.

Private sector credit growth, however, fell from 6.35 per cent in the same period a year earlier to 4.75 per cent in August this year, indicating that stronger deposit mobilisation has yet to translate into a corresponding increase in lending to businesses and other private borrowers.

The report cautioned that private credit growth could remain subdued in the near term if borrowing costs remain high, business confidence recovers slowly and credit risks persist.

Public sector credit, meanwhile, expanded much faster, rising by 32.45 per cent year-on-year to Tk 7.22 lakh crore in August, compared with growth of 14.81 per cent a year earlier.

The widening disparity between public and private sector credit growth has raised concerns that increased government borrowing could limit banks’ capacity to finance private businesses.

“Heavy public sector borrowing may also crowd out private lending. The pace of private credit recovery will therefore be the key indicator to watch,” the report said.

The gap between 12 per cent deposit growth and 4.75 per cent private credit growth points to substantial liquidity in the banking system that is not being channelled into productive private investment, according to the GED assessment.

The report called for policy measures to reduce financing costs, improve the investment climate and strengthen banks’ capacity to extend credit.

It also stressed that continued deposit growth could provide banks with the resources needed to support a recovery in private sector lending as broader macroeconomic conditions improve.

“Sustained deposit growth would give banks the resources to support a revival of private credit as macroeconomic conditions stabilise,” the report added.