Private sector credit growth drops to all-time low of 4.72%

Bangladesh’s private sector credit growth collapsed to a historic low of 4.72% in March 2026, the lowest in 24 years, according to Bangladesh Bank data. The decline follows a steady drop from 6.58% in November 2025 to 6.03% in January and February, before plummeting further amid weak business confidence and economic uncertainty. Outstanding private sector loans stood at Tk23.35 lakh crore by March, reflecting sluggish demand despite political tensions easing after the February election. Economists attribute the slowdown to persistent challenges, including high inflation, rising costs of doing business, and unresolved logistics policies. Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, noted that while political stability has improved, structural issues like energy shortages—worsened by a fuel crisis in March—continue to suppress investment. Factories owned by major groups such as Nassa Group, Beximco Group, and Gazi Group have closed or reduced operations by 60-70%, cutting demand for bank loans. Bankers criticize Bangladesh Bank’s policy direction, citing unclear signals on interest rates, exchange rates, and inflation trends. A deputy managing director of a private bank revealed that many businesses shut down after the fall of the Awami League government, while others operate far below capacity. Lending decisions now hinge on broader economic uncertainty, with banks hesitant to approve loans without clearer policy guidance. The central bank’s decision to cap trade finance interest rates at 3% during the crisis has also raised concerns. With foreign borrowing costs at SOFR plus 2.5%, banks face limitations in extending UPAS financing, forcing them to rely on local currency loans at 12-13% interest—a move that may not stimulate credit growth as intended. Bankers question the feasibility of lowering lending rates amid high inflation, demanding more transparent policy adjustments to revive economic activity.