Private sector credit growth in Bangladesh remained stuck at historically low levels in July聽2025, highlighting the strain on both the banking sector and the broader economy.
According to Bangladesh Bank data, credit to the private sector recorded just 6.52 per cent in July, which was only a marginal rise from June鈥檚 6.5 per cent, which had already marked the lowest growth rate since the central bank began publishing the figures in 2003.
The current growth rate is also far below the 7.2 per cent target that the central bank had set for July-December in FY26.
Economists said the persistent weakness in credit growth reflects deep economic challenges.
They pointed to low business confidence, rising borrowing costs, and political instability as the key reasons why private investment has slowed sharply.
Since the fall of the Awami League government in August 2024, the business environment has been shaken by political uncertainty and weak law and order.
Many entrepreneurs are reluctant to take on new loans or expand operations ahead of the next national election.
Industrial production has been disrupted, with many factories operating at reduced capacity. Consumer demand has also stayed sluggish, discouraging businesses from seeking new loans.
At the same time, the central bank鈥檚 contractionary monetary policy has raised the cost of borrowing.
In its attempt to bring down inflation, the Bangladesh Bank raised its policy rate to 10 per cent.
As a result, commercial lending rates have moved close to 15 per cent. For many small and medium enterprises, such high borrowing costs are no longer affordable.
Bankers said demand for credit has weakened not only because of high interest rates but also due to reduced imports of capital machinery, which indicates that businesses are delaying expansion plans.
The slowdown in imports is also linked to tighter foreign exchange conditions.
The banking sector鈥檚 health has added to the problem. Non-performing loans surged to Tk 4.2 lakh crore by March 2025, almost double of the Tk 1.82 lakh crore NPL recorded a year earlier.
The sharp rise in bad loans has weakened banks鈥� ability to lend and made them more cautious.
Many depositors have already lost trust in weaker banks, worsening liquidity conditions for them.
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.
Economists warned that such low credit growth poses serious risks to the economy. Without adequate credit, industrial activity may stall further, private investment will remain subdued, and job creation will slow down.
