The appetite for borrowing within Bangladesh’s private sector has reached a historic nadir, with credit growth plummeting to 6.20% in December 2025. This marks the seventh consecutive month that the figure has languished below the 7% threshold, underscoring a deepening malaise in the nation’s industrial and commercial landscape.
The latest data from the central bank reveals a significant shortfall against the 7.2% target set in its monetary policy, signalling that the engine of economic expansion is operating on significantly reduced power.
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A Climate of Stagnation
Market analysts and economists point to a “perfect storm” of high inflation, political uncertainty, and prohibitive interest rates as the primary drivers of this slowdown. According to Professor Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue (CPD), the lack of new investment is the root cause.
“Businesses are simply not making new commitments,” he noted, suggesting that this cautious stance is likely to persist until the next election cycle. The resulting stagnation is expected to place significant pressure on employment rates and overall GDP growth in the coming quarters.
Lending Growth Trends (2024–2025)
| Period | Credit Growth Rate | Contextual Note |
| July 2024 | 10.13% | Last instance of double-digit growth |
| December 2024 | 7.28% | Beginning of the steady decline |
| October 2025 | 6.23% | Previous record low |
| November 2025 | 6.58% | Minor temporary rebound |
| December 2025 | 6.20% | Lowest level on record |
Industrial Contraction and High Costs
The real-world implications of this credit crunch are visible in the country’s manufacturing hubs. Large conglomerates, including the Beximco, Nassa, and Gazi groups, have seen operations hampered or shuttered entirely following the political shifts of late 2024. Production at several operational factories has reportedly dropped by 60–70%.
Furthermore, the 10% policy rate maintained by Bangladesh Bank to combat 8.49% inflation has created a high-interest environment, with lending rates hovering between 11% and 12%. Mohammad Hatem, President of the BKMEA, highlighted that many garment factories are avoiding expansion or closing down due to a lack of work orders and the unsustainable cost of capital.
Banks Pivot to Government Securities
With the private sector retreating, commercial banks have fundamentally shifted their income strategies. Rather than navigating the risks of private lending in a volatile market, they are increasingly parking their liquidity in “safe-haven” government instruments.
Treasury Reliance: Banks are earning nearly 11% interest on risk-free Treasury bills and bonds.
Crowding Out: The government’s heavy borrowing—including an additional Tk 10,000 crore in the final quarter—has provided banks with a lucrative alternative to commercial loans.
Balance Sheet Shift: While this has protected the profitability of stronger banks, it effectively diverts capital away from the productive private sector, which is essential for long-term economic resilience.
The current trend reflects a fundamental reshaping of the banking sector’s balance sheets, where government debt is becoming the primary lifeline for financial institutions, even as the private sector starves for investment.