Prolonged macroeconomic uncertainty, severe industrial energy shortages, escalating non-performing loans (NPLs), and cautious enterprise sentiment have driven Bangladesh’s private sector credit expansion down to a 33-year low.
According to data released by Bangladesh Bank, private sector credit growth dropped to 4.47% at the end of June 2026—the lowest rate recorded since 1993.
The figure falls well below the credit expansion levels observed during the height of the Covid-19 pandemic (which maintained a baseline above 7.5%), signaling a widespread freeze in capital expenditure, industrial expansion, and commercial borrowing across the country.
Private sector credit growth fell to 4.47% in June 2026, halving from 10.13% in July 2025 and marking the lowest expansion rate in 33 years.
Total outstanding credit to the private sector reached approximately Tk18,25,000 crore at the end of June 2026, though the rate of new capital creation slowed sharply.
Defaulted loans (NPLs) across the banking sector reached Tk589,000 crore by March 2026, accounting for nearly one-third of total banking sector advances.
To spur credit demand, Bangladesh Bank reduced the policy (repo) rate from 10.0% to 9.5%—the first benchmark rate cut in nearly six years.
The government announced a Tk60,000 crore low-interest stimulus package targeting productive industrial sectors, while credit exposure ceilings for state-owned Sonali Bank were relaxed to facilitate large-scale project financing.
Policy regulators aim to guide private sector credit growth back to 6.8% by December 2026 and 8.0% by the close of the current fiscal year.
Factor / Dimension | Crisis Manifestation | Operational Impact on Enterprise |
Industrial Energy Supply | Gas & electricity deficits in Gazipur, Savar, Narayanganj | Operating capacity cut by 30%–50%; completed factories unable to open |
Banking Risk Aversion | NPLs reach ~Tk 5.89 trillion (~33% of total loans) | Risk-averse banks pivot away from corporate credit toward Treasury bills/bonds |
Trade & Import Demand | Weak export demand & muted domestic purchasing power | Sharp contraction in trade finance and Letters of Credit (LCs) for raw materials |
Borrowing Cost Environment | Elevated interest rates following post-inflation tightening | Deferred capital expenditure and paused factory expansion plans |
Investment stagnation
Commercial banks are prioritizing asset recovery and capital preservation over balance sheet expansion.
With bad loans exceeding Tk589,000 crore, financial institutions are avoiding large industrial exposures, choosing instead to park liquidity in lower-risk government Treasury bills and sovereign bonds.
Simultaneously, business owners face severe operational hurdles beyond high interest rates.
Widespread gas and electricity shortages have left newly constructed industrial plants unable to secure utility connections, while existing units operate at reduced capacity.
Unstable import flows for raw materials, persistent inflation, and law-and-order concerns have led many solvent enterprises to put new project investments on hold.
Central bank officials note that the current low credit growth also reflects stricter oversight compared to previous years, when aggressive double-digit credit expansion went to well-connected corporate borrowers, eventually turning into non-performing loans and capital flight.
Present lending practices are focused heavily on credit quality and end-use verification.
"The economy is navigating a complex crisis period," observed Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank PLC.
"Weakened export demand, reduced consumer purchasing power, severe gas shortages, and broader uncertainty have reduced borrowing appetite among entrepreneurs. Import LC openings for capital machinery remain subdued. Revitalizing credit flow will require coordinated, priority-driven action across government agencies, commercial banks, and business leaders."
Economic policy analysts point out that with 85% to 90% of employment generated by the private sector, stagnant business investment poses a challenge to national job creation goals.
"A policy rate cut from 10% to 9.5% is a positive signal, but lower interest rates alone cannot revive private investment," analysts noted.
"Entrepreneurs require reliable natural gas and electricity supply, policy predictability, streamlined administrative approvals, and tax stability before committing long-term capital."
To move beyond defensive liquidity management and re-ignite private sector capital formation, economists recommend four priority measures:
- Ring-fencing energy supplies to ensure gas and power delivery for newly built factories waiting for grid connections.
- Establishing specialized asset recovery mechanisms to resolve high-value NPLs, freeing up bank balance sheets for fresh corporate lending.
- Directing liquidity from the Tk60,000 crore stimulus package toward labor-intensive small and medium enterprises (SMEs) to protect employment generation.
- Maintaining stable trade, tax, and customs policies to reduce administrative friction and restore long-term investor confidence.
