Private-sector credit flow has fallen to a record low, signalling a deepening crisis in the economy. The latest Bangladesh Bank data show that credit growth declined to 6.35 per cent in August 2025, the lowest in more than 23 years. The previous month recorded 6.52 per cent while figures stood at 6.40 per cent in June, 7.17 per cent in May and 7.5 per cent in April, indicating a sustained decline. The data available since 2003 show that private sector lending has never before fallen to such a level, not even during earlier financial shocks. Economists say that the downturn reflects both structural weaknesses in the banking system and a growing crisis of confidence among businesses. The slowdown has coincided with a period of heightened political uncertainty after the fall of the Awami League regime in August 2024. Non-performing loans reached Tk 4.2 lakh crore by March 2025, more than double the Tk 1.82 lakh crore recorded a year earlier, severely weakening the lending capacity of banks. The central bank targeted a 9.8 per cent private sector credit growth for July鈥揇ecember, but the actual figure remains far below that goal, casting serious doubt over the economy鈥檚 near-term recovery prospects.
The prolonged contraction in private sector credit presents a formidable challenge to economic stability and growth. Reduced lending has directly affected industrial expansion, with factories operating below capacity because of limited access to capital for machinery, technology upgrade and working capital. Sluggish investment has a cascading impact on employment, especially in small and medium enterprises, which account for a major portion of the work force. Entrepreneurs, facing rising uncertainty and high lending rates approaching 15 per cent, are increasingly reluctant to borrow for business expansion or start-ups, slowing job creation and curtailing economic dynamism. Reduced credit availability has also constrained domestic liquidity, limiting consumption and trade activity while dampening the capacity of businesses to invest in future growth. The factors together risk creating a vicious cycle. Low credit growth suppresses industrial output, restricts employment opportunities and weakens consumer demand, which in turn discourages further lending. Beyond immediate economic indicators, the trend threatens investor confidence and may deter foreign investment, undermining long-term development prospects. In a country where the private sector accounts for around 90 per cent of employment, consequences of persistent credit stagnation are particularly severe, highlighting the urgent need for strategic policy interventions and institutional reform.
The government and the central bank should, therefore, act decisively to restore confidence in the financial system. Strengthening banking regulation, recovering non-performing loans and ensuring liquidity for the private sector are essential. Monetary policy should balance inflation control with the need to stimulate lending while targeted support for small and medium enterprises can spur investment and job creation. Political stability and policy continuity are also critical to rebuilding investor trust and sustaining economic growth.