Bangladesh's private sector credit growth has plunged to a record low, intensifying fears of a deepening economic slowdown as businesses retreat from fresh investment amid soaring borrowing costs, political uncertainty, mounting bad loans and a crippling energy crisis.
Latest data from Bangladesh Bank shows that private sector credit growth fell to an unprecedented 6.03 per cent in March, extending an alarming streak of around 6 per cent growth for 10 straight months - a trend economists warn could severely undermine industrial output, employment and overall economic momentum.
The figures reveal that outstanding private sector credit rose to Tk17,85,976 crore in March from Tk17,47,686 crore a year earlier, marking the weakest annual growth ever recorded by the country's banking sector.
The slowdown has become increasingly entrenched. Credit growth stood at 6.17 per cent in February, 6.07 per cent in January and 6.05 per cent in December, reflecting a sustained collapse in investment appetite across the economy.
During the first nine months of the current fiscal year, private sector credit growth was only 2.19 per cent, compared with 2.63 per cent during the corresponding period of the previous fiscal year, underlining the sharp deterioration in business confidence.
A review of central bank data shows the slide began in May 2025, when growth dipped below 7 per cent for the first time in years. Since then, lending expansion has remained trapped near the 6 per cent mark despite repeated policy assurances aimed at stimulating economic activity.
Business leaders say prohibitively high lending rates - currently hovering between 15 and 16 per cent - have become one of the biggest barriers to fresh industrial investment.
They argue that rising import costs, weak consumer demand and persistent uncertainty over gas and electricity supplies have sharply increased production expenses, discouraging entrepreneurs from expanding factories or launching new ventures.
Mohammad Hatem, President of the Bangladesh Knitwear Manufacturers and Exporters Association, said political instability during the interim government period had badly shaken investor confidence.
"Investors are reluctant to move ahead with new projects, while many businesses are scaling down operations. Some factories shut down after the fall of the Awami League government, and many of those still operating cannot utilise full production capacity because of multiple crises," he said.
Hatem added that the rapid rise in default loans had forced banks to tighten lending scrutiny, particularly for large-scale financing, making access to fresh credit increasingly difficult for businesses.
According to him, small and medium-sized enterprises have been hit hardest, with many entrepreneurs adopting a cautious "wait-and-see" stance amid mounting financial risks.
"The prolonged gas and electricity crisis has further worsened the situation. Since industrial production is already being disrupted by energy shortages, many businesses see little reason to expand capacity or seek additional loans," he added.
Prominent economist Anu Muhammad warned that excessively high interest rates are choking investment and threatening industrial sustainability.
"The impact of global conflicts has created further uncertainty in international trade and investment. Many companies have postponed expansion plans because of these combined pressures," he said.
He stressed that while inflation control remains important, lending rates must be brought down to a level that allows businesses to survive, restore investor confidence and revive economic activity.
A senior executive of a private commercial bank, speaking anonymously, said infrastructure bottlenecks were equally responsible for the collapse in investment demand.
"Interest rates are a problem, but they are not the only problem. Investors first assess the availability of gas, electricity, transport and port facilities before making investment decisions. The ongoing infrastructure crisis, especially in the energy sector, has become a major obstacle," the banker said.
Against the backdrop of worsening economic sentiment, newly appointed Mostaqur Rahman, Governor of Bangladesh Bank, has announced plans to revive private sector lending and accelerate economic recovery.
On his first day in office, the governor pledged policy support to gradually reduce lending rates in a bid to stimulate investment and reopen closed industries and commercial establishments across the country.
Economists, however, caution that without swift improvements in political stability, energy security and banking discipline, the country's credit paralysis could deepen further, pushing economic recovery farther out of reach.
