Bangladesh private-sector credit growth falls to 4.75pc in August

Private-sector credit growth in Bangladesh remained subdued at 4.75 per cent in August 2026, keeping formal credit growth to the private sector below the 5.0-per-cent mark for six consecutive months amid a prolonged slowdown in economic activity.

The persistently weak credit growth has raised concerns over the pace of private investment and prospects for a broad-based economic recovery, despite a series of policy and regulatory measures taken by Bangladesh Bank (BB) to revive lending and stimulate economic activity.

The central bank, in its latest monetary policy stance, has projected private-sector credit growth to reach 6.80 per cent by December 2026. However, the latest trend indicates that achieving the target could prove challenging unless demand for new credit and banks’ willingness to lend improve significantly in the coming months.

Money market analysts and entrepreneurs attributed the sluggish credit growth to a combination of supply- and demand-side factors. They pointed to the prevailing business environment, particularly disruptions in energy supplies, which have adversely affected industrial production and weakened investment appetite.

The banking sector’s deteriorating asset quality has also emerged as a major constraint. A sharp rise in non-performing loans (NPLs) has made banks increasingly cautious about extending fresh credit, as lenders are becoming more selective in assessing borrowers amid heightened repayment risks, they said. According to Bangladesh Bank data, private-sector credit growth stood at 4.72 per cent in March, 4.75 per cent in April, 4.98 per cent in May, 4.47 per cent in June, 4.62 per cent in July and 4.75 per cent (provisional) in August.

The figures show that credit growth has remained within a narrow range of around 4.5 to 5.0 per cent throughout the six-month period, indicating prolonged sluggishness in the private sector-led economy.

Seeking anonymity, a BB official said the regulator had provided policy support to struggling borrowers, including a facility allowing them to regularise loans with a two-year moratorium after paying 2.0 per cent of their outstanding loans as a down payment.

The central bank later eased the payment requirement in February after many borrowers struggled to make the 2.0-per-cent payment. Under the revised arrangement, half of the stipulated amount has to be paid upon approval, with the remaining 50 per cent due within six months of the effective date.

“Despite these facilities, private-sector credit growth has not gained momentum yet,” the official said.

The central bank has introduced several measures to encourage banks to resume lending, including facilities for loan rescheduling and restructuring. It has also announced a Tk 600-billion stimulus package aimed at reviving economic activity and supporting businesses affected by the prolonged slowdown. Despite these measures, both banks and private-sector entrepreneurs have yet to regain sufficient confidence to substantially expand lending and investment.

Analysts said the current situation reflects a combination of weak credit demand and constrained credit supply. While banks are reluctant to take additional risks because of elevated NPLs, businesses are also hesitant to borrow in the absence of stronger demand and a more predictable operating environment.

Managing Director of Shahjalal Islami Bank Mosleh Uddin Ahmed said some people attribute declining private-sector credit demand primarily to higher lending costs. “Yes, it is one of the factors, but not the prime one. The prime factor is the energy crisis, which needs to be resolved as quickly as possible,” he said.

Apart from the prevailing energy crisis, NRBC Bank Managing Director and CEO Md Touhidul Alam Khan said credit supply has also tightened as banks have become increasingly risk-averse. With non-performing loans surging to more than 32 per cent of total outstanding loans, banks are reluctant to extend fresh credit for fear of further defaults.

Chairman of Policy Exchange Bangladesh Dr M Masrur Reaz said the slowdown was driven by multidimensional factors, including the Covid-19 pandemic, the Russia-Ukraine war, the volatile political transition following the 2024 mass uprising, weaknesses in regulatory policy enforcement and ongoing tensions in the Middle East.

Apart from these factors, he said, high inflation has dampened market demand and significantly reduced industrial output. The ongoing energy crisis, which he attributed to policy failures over more than 15 years, has further worsened the situation.