Consumer borrowing surges as high living costs push families to banks

Bangladeshis are borrowing more than ever to cope with soaring living costs, with consumer loans rising sharply despite elevated interest rates, stubborn inflation and slowing economic activity, signalling growing financial stress on households while exposing a shift in banks' lending strategy away from riskier corporate financing.

Latest Bangladesh Bank (BB) data show that outstanding consumer loans climbed to Tk 1,58,335.88 crore at the end of March 2026, up by Tk 6,597.77 crore from Tk 1,51,738.11 crore three months earlier. 

Compared with Tk 1,47,000 crore a year ago, retail lending expanded by more than Tk 11,000 crore, underscoring robust demand for personal financing even as borrowing costs remain at multi-year highs.

The central bank's figures indicate that the growth was driven largely by rising demand for housing finance, salary-backed loans, credit cards, land purchases and other personal borrowing as households increasingly turned to banks to finance essential expenses.

Housing loans continued to gain momentum, with outstanding loans for flats and apartments rising to Tk 32,000 crore by the end of March from Tk 31,085 crore at the end of December. Salary-backed loans also increased to Tk 23,235 crore, up from Tk 22,595 crore over the same period.

Credit card borrowing maintained its upward trajectory, reflecting growing dependence on short-term borrowing to meet day-to-day expenses. Outstanding credit card debt increased to Tk 13,519 crore at the end of March from Tk 13,103 crore three months earlier.

Demand for other forms of personal finance also strengthened. Loans for land purchases rose from Tk 6,936 crore to Tk 7,181 crore, while financing for cars and motorcycles increased from Tk 6,085 crore to Tk 6,374 crore.

The fastest growth, however, was recorded in loans secured against Fixed Deposit Receipts (FDRs) and other savings instruments, which jumped from Tk 22,591 crore to Tk 27,625 crore, reflecting customers' preference to unlock liquidity without encashing their savings.

Loans extended to doctors and other professionals edged up to Tk 1,063 crore from Tk 1,038 crore, while provident fund-backed loans increased to Tk 1,887 crore from Tk 1,750 crore. Other personal loans also rose modestly to Tk 3,066 crore from Tk 2,990 crore.

In contrast, financing for household appliances, including televisions, refrigerators and computers, declined slightly to Tk 34,535 crore from Tk 34,662 crore, suggesting consumers are prioritising essential spending over discretionary purchases.

Bankers said consumer finance is increasingly being used not only for buying durable goods but also for meeting everyday expenses, including education, healthcare, weddings, travel and professional needs, as persistent inflation continues to erode household purchasing power.

They noted that despite higher lending rates, demand for retail credit has remained resilient, encouraging banks to expand consumer financing at a time when private sector investment remains weak and corporate lending risks have intensified.

Bangladesh Bank Spokesperson Arif Hossain Khan said rising demand for small-ticket loans, coupled with aggressive retail lending campaigns by banks, had fuelled the steady expansion of consumer credit.

He said many banks were increasingly shifting their focus towards retail lending as sluggish private investment and heightened risks in corporate financing made consumer loans a relatively attractive alternative. Such loans are processed more quickly, generate stable returns and help diversify banks' loan portfolios, he added.

Economists, however, cautioned that the rapid expansion of consumer credit presents a mixed picture for the economy.

While retail loans provide much-needed financial relief to households grappling with rising living costs, excessive reliance on borrowing for consumption rather than productive investment could weaken long-term economic growth.

They warned that if consumer lending continues to outpace credit to industries, exporters and businesses, it could undermine investment, slow job creation and increase future repayment pressures, potentially leading to a fresh build-up of non-performing loans (NPLs) and greater financial sector vulnerabilities.

Banking analysts said sustaining economic growth would require a better balance between consumer finance and productive lending, urging banks to channel more credit into investment while maintaining rigorous oversight of loan quality and credit risks.