Private sector credit growth in Bangladesh fell to record 6.40 per cent in June 2025, the lowest in 22 years, reflecting deepening stress in the country鈥檚 economy.
The Bangladesh Bank data, available from 2003 onward, shows that the growth rate had never dropped to this level before. In February 2003, the rate was around 12 per cent.
Economists said the continuous decline in credit growth highlights a worsening crisis in both the banking sector and the broader business environment.
They pointed to ongoing political instability, disruptions in law and order, and growing uncertainty following the fall of the Awami League government in August 2024 as key reasons behind the slump.
Banks are also facing severe operational challenges. Rising volumes of defaulted loans, large-scale deposit withdrawals, and liquidity shortages have significantly weakened their capacity to lend.
The total amount of non-performing loans in the banking sector jumped to Tk聽4.2 lakh crore by the end of March 2025, up from Tk聽1.82 lakh crore a year earlier.
The thin private sector credit also attributed to lower imports, particularly of capital machinery.
Economists explained that greater investment in machinery would allow businesses to expand, which in turn would improve liquidity in the financial system and encourage more deposits in banks.
But current political instability has disrupted industrial production. Many factories are operating below capacity, and consumer demand has remained weak. As a result, loan defaults are expected to rise further, they added.
The recent imposition of reciprocal tariffs by the United States on Bangladeshi exports may also worsen the situation, they said.
Monthly data from the Bangladesh Bank shows that private sector credit growth has steadily declined 鈥� 7.17 per cent in May, 7.5 per cent in April, 7.57 per cent in March, 6.82 per cent in February, 7.15 per cent in January, and 7.28 per cent in December 2024.
While the slowdown began in late 2022, it accelerated significantly after the political transition in August 2024.
In BB鈥檚 January monetary policy, the central bank had set a target of 9.8 per cent private sector credit growth for the period through July 2025.
However, actual growth has remained far below that goal, raising concerns about the economy鈥檚 ability to recover momentum.
Economists warned that persistently low credit growth could stall industrial activity, discourage new investment, and slow down job creation.
Business confidence remains low, and many entrepreneurs are reluctant to borrow or expand operations ahead of the next national election.
High inflation, rising lending rates and poor loan recovery are also making it harder for businesses to afford borrowing.
In its February 10 policy statement, the Bangladesh Bank acknowledged that the credit slowdown is not solely the result of interest rate hikes.
It said the decline is also linked to slow deposit growth and rising government borrowing from commercial banks, which has reduced the availability of funds for private sector lending.
As part of its efforts to control inflation, the central bank raised its policy rate to 10 per cent.
This has pushed commercial lending rates close to near 15 per cent, making bank loans unaffordable for many businesses and further weakening demand for credit.
