Private-sector credit growth hits record low at 4.47% amid weak demand, energy crisis

Private-sector credit growth fell to a historic low of 4.47 percent in June, below Bangladesh Bank’s 5.5 percent target for the month.

The rate was 4.98 percent in May and 4.75 percent in April. In March, it had already hit a record monthly low of 4.72 percent.

Bangladesh Bank spokesperson Arief Hossain Khan said the central bank had cut its policy rate and begun implementing incentive packages to boost lending and economic activity.

But businesses say the energy crisis is choking demand.

Bangladesh Knitwear Manufacturers and Exporters Association President Mohammad Hatem said many factories were operating at less than half capacity, with some down to one-third.

“Buyers have started reducing orders until the situation improves. In this situation, there will be no demand for new loans,” he told bdnews24.com.

Outstanding private-sector credit stood at Tk 18.26 trillion in June, up 4.47 percent from Tk 17.48 trillion a year earlier.

Analysts say banks are accumulating liquidity as lending slows, while energy uncertainty keeps investment subdued and the economy struggles to regain momentum.

Bangladesh Bank’s latest quarterly report attributed weak credit demand partly to slowing economic activity and rising bad loans, which have crossed 32 percent, making banks more cautious about new lending.

Shahjalal Islami Bank Managing Director Mosleh Uddin Ahmed said high interest rates also mattered, but the energy crisis remained the main concern.

BIBM Director General Ejazul Islam said lower credit growth would not necessarily be harmful if lending flowed into productive sectors.