Private sector credit growth in Bangladesh remained stuck below 7 per cent for a sixth consecutive month in November 2025, underscoring a deepening investment slowdown and exposing the widening gap between policy expectations and business reality.
Bangladesh Bank data showed that private sector growth had eased to 6.58 per cent by the end of November, well below the 7.2 per cent projection by the central bank and fell short of the levels normally associated with sustained investment and growth.
Economists and bankers say the weakness reflects a broad retreat from new investment, driven by high borrowing costs, policy uncertainty, political instability and worsening energy shortages.
The November figure marked the sixteenth straight month of single-digit private sector credit growth. A year earlier, growth stood at 7.66 per cent in November 2024.
The last time it reached double digits was July 2024, when credit growth peaked at 10.13 per cent. From August that year onward, lending momentum steadily eroded, hitting 6.23 per cent in October 2025, which economists describe as the lowest level on record in recent decades.
Bankers say entrepreneurs have little appetite for fresh borrowing. Elevated interest rates have raised the cost of capital, while uncertainty over policy direction and demand conditions have made long-term investment decisions harder to justify.
The slowdown is already visible in one the main trade-related indicators, settlements of capital machinery, where imports fell by more than 16 per cent during the July–November period, signalling a sharp pullback in capacity expansion.
Senior bank officials point to a marked deterioration in operating conditions for large manufacturers. Following the fall of the Awami League government, several businesses have shut down, while many others are running far below capacity.
Factories under groups such as Nassa, Beximco and Gazi have ceased operations, according to bankers, eliminating a major source of bank borrowing.
Even firms that remain active have cut production by 60 to 70 per cent compared with earlier levels, sharply reducing their demand for working capital and investment loans.
Business leaders also cite political instability and what they describe as a “mob culture” as key deterrents to new investment. They argue that until law and order stabilises and policy signals become clearer, large-scale private investment is unlikely to return.
Energy insecurity has compounded the problem. Persistent gas shortages over recent months have disrupted factory operations, limiting output and eroding profitability.
Bankers say many firms are struggling to operate at planned capacity and expect year-end losses, further discouraging expansion plans. Repeated appeals to resolve gas and power constraints have yielded little progress, reinforcing caution across the private sector.
The slowdown in private lending has reshaped bank balance sheets. With limited demand for loans, banks have increased investments in treasury bills and bonds, drawn by returns of around 11 per cent with minimal risk.
Government borrowing from banks has remained heavy, including an additional Tk10,000 crore raised outside the original calendar during the October–December quarter, further absorbing banking system liquidity.
As a result, a growing share of banks’ income now comes from government securities rather than traditional lending. While early 2025 raised concerns about rising deposit rates, inflation and squeezed margins, stronger private banks have managed to lift profits not through credit expansion but through sizeable earnings on sovereign paper.
Analysts warn, however, that this shift—while supporting bank profitability in the short term—risks entrenching a low-investment equilibrium that could weigh on growth, employment and export competitiveness unless confidence and energy security are restored.
