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The volume of consumer loans in the country's banking system soared by over 17 per cent in 4th quarter (Q4) of the last fiscal.
According to the latest Bangladesh Bank (BB) data, the amount of consumer loans during the April-June period of the fiscal year (FY) 2024-25 rose by Tk 250 billion.
In the third quarter of the FY 2024-25, the volume of consumer credit stood at Tk 1.47 trillion, showing a 1.81 per cent rise from that of the previous quarter.
In the first quarter (July-September) of FY 2024-25, the total volume of consumer loans was over Tk 1.39 trillion, the central bank figures showed.
In the second quarter (October-December), the amount of consumer loans increased to Tk 1.45 trillion, reflecting a 3.73 per cent growth over the previous quarter.
On the other hand, the volume of outstanding consumer loans reached Tk 1.73 trillion at the end of the last quarter of FY'25.
According to the BB data, in the last three months of the previous fiscal year, the amount of consumer loans on account of purchase of TVs, refrigerators, and computers rose by Tk 94.49 billion to Tk 446.53 billion over the previous quarter, followed by purchase of flats/apartment costing Tk 314.38 billion, up by Tk 8.84 billion.
The volume of loans for purchasing motor vehicles and motorcycles rose by Tk 18.25 billion in the Q4 of last fiscal.
Borrowing through credit cards rose by Tk 5.84 billion and education loans increased by Tk 11.21 billion and medical loans by Tk 310 million.
Consumer credits for purchase of lands and for the purposes of marriage increased by Tk 5.11 billion and Tk 160 million respectively in the Q4 of the last fiscal.
Salary-based loans also rose by Tk 12.56 billion, followed by provident fund-backed loans rising by Tk 14.91 billion, DPS-backed loans Tk 11.51 billion and FDR-backed loans Tk 26.92 billion.
In the quarter under review, the amount of professional loans also increased by Tk 640 million, the BB data showed.
Although consumer loans are used for purchasing luxury or household items, such loans are now used for education, medical expenses, marriage, travel, and even professional purposes. Keeping this in view, banks are also offering increased volumes of consumer loans at higher rates of interest.
According to experts, though consumer loans give some temporary relief to families, it creates an extra burden on them in the long run.
If investment does not increase in the productive sector, the country's employment and economic growth could be affected, they observed.
"Bangladesh's sharp rise in consumer loans, particularly in the last quarter of FY 2024-25, reflects the increasing pressure on middle-class households from inflation and stagnant incomes," Dr. Masrur Reaz, Chairman of Policy Exchange Bangladesh, told the FE.
"While borrowing for consumer goods such as TVs, refrigerators, and computers may provide short-term relief, the growing reliance on consumer credit instead of productive-sector investment is concerning. Over time, this trend could constrain sustainable economic growth and reduce employment opportunities," he said.
Banks should balance credit expansion between consumer and industrial sectors, Dr. Reaz suggested, adding that policymakers also need to address inflation and income stagnation to reduce households' over-dependence on high-interest loans.
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