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Formal credit growth in the private sector remains almost static, reaching 4.75 per cent in April, signalling a deep slowdown in the country's business activities.
The low trend in credit demand from private enterprises is attributed to banks becoming more cautious amid rising non-performing loans (NPLs) and private borrowers losing their credit appetite due to multiple anti-business factors, including the energy crisis, higher lending costs, and external shocks stemming from the Middle East crisis.
The Bangladesh Bank's (BB) private sector credit growth data, available since 2003, shows April growth was the second-lowest after the previous month's count of 4.72 per cent.
According to the BB, outstanding loans taken by private sector entrepreneurs reached Tk 18.03 trillion by the end of April, up 4.75 per cent from Tk 17.22 trillion a year earlier.
In fact, private credit growth has hovered around single digits since August 2024, reflecting prolonged sluggishness in the $460 billion economy that is largely private-sector-led.
Seeking anonymity, a central bank official says the banking regulator continues its contractionary monetary policy stance, keeping the policy rate at 10 per cent as part of its inflation control measures despite criticisms from business circles.
"The higher lending rate, energy crisis, and external shocks stemming from the Middle East crisis are major reasons behind the plummeting credit demand," he says.
He mentions the half-yearly monetary policy statement (MPS) projection for private credit growth up to June next year is 8.50 per cent, but the current growth remains below that.
However, growth could pick up in the last quarter of FY26, he adds.
President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Mohammad Hatem says entrepreneurs are struggling to survive in the market under the extreme business and investment climate that prevails.
He cites multiple factors like the prolonged energy crisis, higher borrowing costs, and anti-business taxation policy, saying these are making it difficult for businesspeople to survive.
"Under such circumstances, who dares to think of business expansion? I do not know how the growth (4.75 per cent) has happened and who the borrowers are. Will they be able to repay the loans? I have enough doubts," he adds.
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