Industrial term loan disbursements declined in the October-December period of 2024 compared with the same period of the previous year, reflecting the ongoing economic distress driven by political unrest and sharp depreciation of the local currency.
Banks disbursed Tk 33,605 crore in industrial term loans during the quarter, slightly lower than Tk 33,763 crore in the corresponding period of the previous year, according to Bangladesh Bank data.
Bankers attributed the decline to prolonged political unrest, which disrupted business operations and delayed investment decisions.
Additionally, the sharp rise in the dollar exchange rate exerted further pressure on industrial financing. The dollar rate surged to Tk 122, up from Tk 110 a year earlier and Tk 99 in December 2022, significantly raising the cost of imported raw materials and machinery.
With the taka losing value, businesses reliant on imports faced higher costs, leading to a greater demand for financing.
Companies with dollar-denominated loans also experienced a rise in repayment burdens, prompting many to refinance their debts in local currency.
Economic challenges such as a severe liquidity crisis in banks, rising non-performing loans, dollar shortages and soaring inflation continued to constrain credit growth.
Although industrial term loan disbursements increased from Tk 23,116 crore in the July-September quarter to Tk 33,605 crore in the October-December period of 2024, businesses struggled with the rising cost of borrowing.
Lending rates climbed to nearly 14 per cent in early 2025, up from 12 per cent in March 2024 and 10 per cent in December 2023, further discouraging new investment.
Private sector credit growth slowed to 7.15 per cent in January, reflecting the broader economic slowdown.
The opening and settlement of letters of credit for importing capital machinery also declined in the first eight months of the 2024-25 financial year, underscoring reduced industrial activity.
On the recovery side, industrial term loan repayments increased to Tk 27,489 crore in the October-December period of FY25, compared with that of Tk 25,062 crore in the same period of the previous financial year.
However, the total outstanding industrial term loans surged to Tk 4,84,426 crore in the quarter, up from Tk 4,33,807 crore a year earlier.
The ongoing economic downturn is squeezing business revenues and cash flow, making it increasingly difficult for companies to meet their debt obligations.
If the situation persists, the banking sector could face further strain due to rising defaults.
