Business Report :
The flow of formal credit to the private sector further downslide in July, the first month of the current financial year of 2025-26, recorded just 6.52 per cent in July, which was only a marginal rise from June’s 6.5 per cent.
Monthly data from the Bangladesh Bank also showed that private sector credit growth has steadily declined – 7.17 per cent in May, 7.5 per cent in April, 7.57 per cent in March, 6.82 per cent in February, 7.15 per cent in January, and 7.28 per cent in December 2024.
Officials and money-market analysts say such a continuous downturn in the private-sector credit demand, despite marginal easing of import compression on the domestic market, is not a good sign for the $450 billion economy.
Bankers seemed to have been very conservative in approving loans to the private sector players amid prevailing economic sluggishness to avert further buildups of the NPLs (non-performing loans).
In BB’s monetary policy for H1FY26, The BB set the private sector credit growth target at 7.2 percent for the six months, down from a target of 9.8 percent set for the preceding six months, reflecting the contractionary nature of the monetary policy as BB maintained its policy rate to 10 per cent.
As a result, commercial lending rates have moved close to 15 per cent. For many small and medium enterprises, such high borrowing costs are no longer affordable.
Bankers said demand for credit has weakened not only because of high interest rates but also due to reduced imports of capital machinery, which indicates that businesses are delaying expansion plans.
Amid declining private investment, data from the central bank shows that total imports in FY25 (July-June) stood at around $69 billion, up just 0.18 percent or $122 million from the previous fiscal year. However, the growth was not across the board.
Import LCs for capital machinery, essential for investment, fell by over 25 percent year-on-year. Import LCs for intermediate goods, petroleum, and industrial raw materials also declined over the same period – a trend seen as a sign of weakening economic momentum.
