Private sector credit growth in Bangladesh fell sharply to 7.66 per cent in November, the lowest in 41 months, intensifying challenges in the banking sector and the broader economy.
According to Bangladesh Bank data, credit growth has been on a steady decline for four consecutive months.
It stood at 8.3 per cent in October, 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 November figure is the lowest since May 2021, when credit growth dropped to 7.55 per cent amid Covid-19 lockdowns.
Bank officials attributed the decline to a stagnant business environment, political unrest, and weak law enforcement.
Businesses have adopted a cautious 鈥榳ait-and-see鈥� approach, refraining from new investments.
Despite the installation of an interim government following Sheikh Hasina鈥檚 ousting on August 5 through a mass uprising, the business climate has shown limited improvement, they said.
High inflation, soaring lending rates, and poor loan recovery have further dampened credit growth.
The central bank鈥檚 contractionary monetary policy, including a policy rate hike to 10 per cent, has pushed borrowing costs to nearly 15 per cent, making loans prohibitively expensive for many businesses.
Moreover, several businesses have shut down operations due to political instability, legal issues tied to their associations with deposed Sheikh Hasina, and what some have described as an unfriendly business environment.
Prominent conglomerates such as Beximco and Bashundhara have defaulted on loans, disqualifying them from accessing further credit.
The banking sector鈥檚 ability to disburse loans has also been severely impacted by rising defaulted loans, significant deposit withdrawals, and liquidity shortages.
Some banks have resorted to seeking assistance from the central bank and larger institutions to meet daily cash demands.
The erosion of depositor confidence, driven by massive loan scandals and irregularities during the Awami League regime, has exacerbated the situation.
Many depositors have withdrawn their funds, fearing lack of safety for their savings.
Economic challenges such as high inflation, foreign exchange volatility, and an ongoing dollar shortage have added to the difficulties.
The exchange rate has surged to Tk 123 per US dollar from Tk 90 over the past two years, significantly increasing the cost of imports.
Businesses have struggled to absorb these costs, and the unpredictability of dollar prices has further discouraged imports and business activities.
The energy crisis and broader economic uncertainties have left businesses hesitant to seek bank loans, deepening the slowdown in credit growth.
As the economic landscape remains uncertain, both businesses and banks face mounting challenges in navigating the current environment.
