Private sector credit growth fell to a historic low of 4.72 per cent in March, the latest data from Bangladesh Bank shows, underscoring deepening weakness in the country’s economic recovery just a month after the BNP-led government assumed office.
The sharp decline reflects growing caution among banks amid rising non-performing loans (NPLs), while businesses are increasingly reluctant to borrow due to a combination of anti-business factors, including the ongoing energy crisis, high lending costs, exchange rate volatility, and an investment-unfriendly tax regime.
Bangladesh Bank data dating back to 2003 shows that private sector credit growth has never fallen this low, even during previous periods of financial stress.
According to the central bank, private sector credit growth stood at 4.72 per cent at the end of March, down from the previous record low of 6.03 per cent recorded in February this year.
Private sector credit growth has, in fact, remained in single digits since August 2024, signalling prolonged sluggishness in Bangladesh’s largely private sector-driven economy.
A Bangladesh Bank official, speaking on condition of anonymity, said the energy crisis, external shocks linked to the Middle East conflict, and elevated lending rates were the main factors behind the steep fall in credit demand.
Despite criticism from business groups, the central bank has maintained its contractionary monetary policy stance, keeping the policy rate unchanged at 10 per cent as part of its efforts to contain inflation.
The half-yearly Monetary Policy Statement projected private sector credit growth at 8.50 per cent by June 2026, but current figures remain significantly below that target.
Bangladesh Bank officials, however, believe credit growth may recover in the final quarter of FY2025-26.
Md Ezazul Islam, director general of the Bangladesh Institute of Bank Management, said private sector credit growth of around 5 per cent is not necessarily harmful if the funds are directed towards productive sectors.
He noted that even double-digit credit growth would have little positive impact if the money flowed into unproductive sectors, warning that such lending could further stoke inflation.
