Bangladesh Bank’s latest interest-rate cut will do little to revive investment unless banks translate cheaper central-bank money into lower borrowing costs for businesses, according to Business Initiative Leading Development (BUILD).
The business policy group welcomed the central bank’s first quarterly monetary policy statement for October-December 2026, but said its priority should be reviving private-sector credit growth, which remains weak despite a reduction in the policy rate.
Bangladesh Bank, from the beginning of August, lowered the repo rate to 9.50 per cent from 10 per cent, seeking to support economic recovery while maintaining pressure on inflation.
But businesses are still paying effective lending rates of between 13 per cent and 17 per cent, BUILD said in a press statement, leaving a wide gap between the central bank’s policy stance and the cost of money in the real economy.
Private-sector credit growth stands at just 4.75 per cent, according to BUILD.
For small and medium-sized businesses, borrowing can be particularly expensive. Although the Standing Lending Facility rate is 11 per cent, risk premiums, processing costs and bank spreads of around 3.5 percentage points can push actual borrowing costs considerably higher.
BUILD said Bangladesh Bank should focus on narrowing the spread between lending and deposit rates to make credit more affordable.
The problem is compounded by mounting stress in the banking sector, with the non-performing loan ratio at 32.78 per cent, according to the organisation.
Bad loans weaken bank capital and make lenders more reluctant to extend new credit, reducing the effectiveness of monetary easing.
BUILD called for a clear, time-bound strategy to resolve non-performing loans, backed by stronger governance and debt-recovery mechanisms.
The organisation also warned that recent progress on inflation could prove fragile. Headline inflation eased to 8.26 per cent in August, but higher fuel prices in late September could feed through to transport, production and consumer costs.
Global volatility linked to the Middle East conflict and disruptions in the Strait of Hormuz could add further pressure, it said.
BUILD said monetary policy should also give greater weight to employment and industrial recovery, noting that industrial growth fell from 6.82 per cent in the first quarter to minus 0.28 per cent in the third quarter.
High borrowing costs, fuel prices and external uncertainty are adding to pressure on companies already facing sluggish demand and weak access to finance.
The group said Bangladesh Bank should go beyond setting and monitoring its policy rate and develop a framework showing how monetary policy is feeding through to private investment, industrial production, SME lending and employment.
It also called for closer monitoring of working-capital availability, collateral requirements, credit-approval times, sectoral credit flows and the gap between the policy rate and effective lending rates.
BUILD said greater policy predictability, lower borrowing costs and stronger banking-sector governance would be critical to restoring business confidence and supporting investment.
Without stronger monetary transmission, it warned, a lower policy rate risks remaining largely a signal from the central bank rather than cheaper money for businesses.
