Private sector credit growth in Bangladesh dropped in October to 8.30 per cent, the lowest in 41 months, reflecting deepening challenges in the banking sector and the broader economy.
Data from the Bangladesh Bank showed that the credit growth dropped to 8.30 per cent in October, down from 9.2 per cent in September, 9.86 per cent in August, 10.13 per cent in July and 9.84 per cent in June.
The October figure is the lowest since May 2021, when the credit growth fell to 7.55 per cent amid the Covid outbreak lockdowns.
The credit growth remained above 9 per cent until September 2024, underscoring the severity of the recent downward turn.
Bank officials cited stagnant business climate, political unrest and poor law enforcement as major contributors to the slump.
Businesses took a wait-and-see policy and avoided making new investments as they thought that law and order situation did not improve notably even after three months of the interim government installed after the ousting of Sheikh Hasina-led government on August 5 through a mass uprising, bankers said.
Rising inflation, high lending rates and poor loan recovery also deterred credit growth. The central bank鈥檚 contractionary monetary policy, with a policy rate hike to 10 per cent, raised borrowing costs to nearly 15 per cent, making loans excessively expensive for many businesses, bankers said.
The banking sector鈥檚 capacity to disburse loans has been weakened by rising defaulted loans, deposit withdrawals and liquidity shortages.
Banks have sought assistance from the central bank and larger institutions to meet daily cash demands.
Massive loan scandals and irregularities during the Awami League regime eroded depositor confidence, prompting many to withdraw funds out of fear of losing their savings.
Economic challenges such as high inflation, foreign exchange volatility, dollar shortage and an energy crisis have further dampened business activities, making businesses hesitant to seek bank loans.
A dollar shortage in the country has curtailed business operations and reduced the demand for credit.
The exchange rate reached Tk聽120 from Tk聽90 against the US dollar within a couple of years.
