Private sector credit growth in Bangladesh dropped to a record low of 6.35 per cent in August 2025, the lowest in more than 23 years, signaling deepening distress across the economy.
Bangladesh Bank data, available since 2003, shows that credit growth has never fallen this low 鈥� even during earlier financial shocks.
Economists said the continuous slowdown reflects a combination of structural weaknesses in the banking sector and worsening confidence among businesses.
They pointed to political instability and uncertainty following the fall of the Awami League government in August 2024 as key reasons behind the slump.
Banks are also struggling with liquidity shortages, rising defaults, and erosion of depositor confidence.
Non-performing loans surged to Tk 4.2 lakh crore by the end of March 2025, more than double the Tk 1.82 lakh crore recorded a year earlier.
This sharp deterioration has severely weakened banks鈥� lending capacity and risk appetite.
Analysts said sluggish credit growth has hit imports of capital machinery, stalling industrial expansion.
Weaker investment has, in turn, reduced liquidity circulation in the economy.
Factories are running below capacity, consumer demand remains subdued, and entrepreneurs are increasingly reluctant to borrow amid market uncertainty.
Bangladesh Bank data shows a steady monthly decline 鈥� 6.52 per cent in July, 6.40 per cent in June, 7.17 per cent in May, and 7.5 per cent in April.
The trend has been consistent since early 2024, with the decline accelerating after the political transition in August that year.
The central bank, in its January monetary policy statement, had targeted 9.8 per cent private sector credit growth for July鈥揇ecember 2025.
The actual figure now stands far below that mark, prompting concerns about the economy鈥檚 capacity to regain momentum.
Experts warned that persistently low lending to businesses could further slow industrial output, reduce investment, and delay job recovery.
Bankers said high lending rates have also dampened borrowing demand.
In its attempt to curb inflation, the Bangladesh Bank raised its policy rate to 10 per cent, pushing commercial lending rates close to 15 per cent.
The central bank, in its February policy note, acknowledged that the credit slowdown stems not only from high interest rates but also from weak deposit growth and rising government borrowing from commercial banks.
