Industrial term loan disbursements declined notably in the January鈥揗arch quarter of 2025 comparing with the same period in the previous year, reflecting the deepening economic crisis stemming from persistent political unrest, a volatile business climate, and ongoing distress in the banking sector.
According to the latest data from Bangladesh Bank, banks disbursed Tk聽19,614 crore in industrial term loans during the first quarter of 2025, down from Tk聽22,015 crore during the same period in 2024.
Bankers and analysts attributed the decline to prolonged political instability since the change in government on August 5, 2024.
Frequent street agitation and administrative uncertainty have stalled fresh investments, with many entrepreneurs adopting a wait-and-see approach. The economic policy direction under the interim government remains unclear, further undermining investor confidence, they said.
Adding to the pressure, the sharp depreciation of the taka has severely impacted industrial financing.
The dollar exchange rate surged to Tk 123 in May 2025, up from Tk 110 in May 2024 and Tk 99 in December 2022, driving up the cost of importing raw materials and capital machinery.
This has increased operational expenses for businesses and pushed many firms with dollar-denominated debts to refinance in local currency to avoid soaring repayment burdens.
Despite the fall in loan disbursements, loan recovery rose in the same quarter.
Industrial term loan recovery increased to Tk 26,436 crore, up from Tk 23,468 crore in the January鈥揗arch period of 2024, reflecting businesses鈥� attempts to deleverage in an uncertain environment.
However, total outstanding industrial term loans declined to Tk 3,89,282 crore from Tk 4,28,079 crore a year earlier, indicating weak loan demand and limited new industrial activity.
The banking sector itself is under stress, grappling with a severe liquidity crisis, a growing volume of non-performing loans (NPLs), and a weakening asset quality profile, leading to depositor anxiety.
Moreover, businesses struggled with the rising cost of borrowing.
Lending rates climbed to nearly 15 per cent, up from 12 per cent in March 2024 and 10 per cent in December 2023, further discouraging new investment.
Private sector credit growth, although slightly up at 7.57 per cent in March 2025 from 6.82 per cent in February, remains well below pre-crisis levels, highlighting the broader economic slowdown.
Furthermore, the volume of letters of credit opened and settled for capital machinery imports鈥攁 leading indicator of industrial investment鈥攄eclined during the first nine months of FY2024鈥�25.
The ongoing economic downturn is squeezing business revenues and cash flow, making it increasingly difficult for companies to meet their debt obligations, experts said.
If current conditions persist, many companies may struggle to meet debt obligations, raising concerns of a new wave of loan defaults and further destabilization of the banking sector, they said.
