Private sector credit growth fell to a record-low 4.17 per cent in September, extending a seven-month run below 5 per cent as high borrowing costs, weak investment demand and banking-sector stress continued to restrain lending.
The rate dropped from 4.75 per cent in August and was the lowest since Bangladesh Bank began compiling the series in 2003.
Credit growth has remained below 5 per cent since March, when it stood at 4.72 per cent. It was 4.75 per cent in April, 4.98 per cent in May, 4.47 per cent in June, 4.62 per cent in July and 4.75 per cent in August before falling again in September.
The prolonged weakness comes as businesses contend with lending rates of around 15 per cent, uncertain investment prospects, energy shortages and higher operating costs.
Government borrowing has added another source of pressure on the banking system. Net government borrowing from banks reached Tk47,800 crore in the first four months of fiscal 2026–27, nearly 43 per cent of the annual target, according to Bangladesh Bank sources.
At the same time, liquidity constraints and weak balance sheets at parts of the banking sector have limited some banks’ capacity and willingness to extend fresh credit, particularly for expansion and new investment.
Energy shortages have also discouraged investment as businesses face uncertainty over the availability and cost of gas and electricity.
Mutual Trust Bank Managing Director and CEO Syed Mahbubur Rahman said several major industrial groups were struggling and had cut production, reducing their need for bank financing.
Rahman, a former chairman of the Association of Bankers, Bangladesh, said irregularities during the previous government had weakened the banking sector, leaving only slightly more than 15 banks in sound financial condition and constraining lending capacity.
He said controlling inflation would be important to restoring business confidence and encouraging new investment.
Borrowing costs remain high despite Bangladesh Bank cutting its policy rate to 9.5 per cent from 10 per cent on 31 July.
Commercial lending rates continue to hover around 15 per cent, making fresh borrowing expensive for businesses. Cottage, micro, small and medium enterprises have been particularly affected as they seek financing for operations and expansion.
Weak credit growth matters because bank lending remains a key source of financing for industrial production, trade, working capital and investment. A prolonged slowdown can delay expansion plans and weaken job creation.
The September reading also illustrates the challenge facing policymakers as they try to contain inflation without further weakening investment.
Bangladesh Bank had set a private sector credit growth target of 6.8 per cent for the first half of FY27, expecting lending to recover gradually. September’s 4.17 per cent growth shows how far private credit remains from that target.
Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Administrator Md Fazlul Hoque told TIMES that a global economic slowdown and energy shortages had discouraged the establishment of new factories, weakening fresh investment and demand for bank loans.
Hoque, a former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), also said the country’s banking sector remained weak.
Although liquidity was available in the banking system, subdued investment demand had further contributed to the slowdown in private sector credit growth.
