Private sector credit growth edges up to 7.57% in March

High bank interest rates are discouraging business owners from taking loans, says MTB boss Syed Mahbubur Rahman

Since the July Uprising, the downward trend in private sector credit growth has shown some fluctuations, but is yet to change course.

Private sector credit growth in Bangladesh rose slightly to 7.57 percent in March, up from 6.82 percent in February, according to Bangladesh Bank data released on Thursday.

Despite the uptick, credit growth has remained below 8 percent for five consecutive months, signaling ongoing weakness in private sector borrowing amid high interest rates and economic uncertainty.

In January, credit growth stood at 7.15 percent. The latest figure is still well below the double-digit levels seen prior to the political upheaval last year.

Credit growth was 10.13 percent in July but fell to 9.86 percent in August, following the fall of the Awami League government.

It slipped further to 9.20 percent in September—its lowest in three years—and continued to decline: 8.30 percent in October, 7.66 percent in November, and 7.28 percent in December.

Bangladesh Bank has been publishing private sector credit growth figures since January 2015.

The last time growth dipped to a similar level was in May 2021, during the COVID-19 pandemic, when it hit 7.55 percent.

Central bank data also show a significant contraction in investment appetite. In the first nine months of the current fiscal year, the opening of Letters of Credit (LCs) for importing capital machinery dropped 28.68 percent year-on-year.

“The overall economic situation is unstable, and as a result, investment remains subdued,” said Syed Mahbubur Rahman, managing director of Mutual Trust Bank (MTB), in an interview with bdnews24.com.

“Business owners argue that bank interest rates are too high, which discourages them from taking out loans.”

The central bank has tightened liquidity to rein in inflation, but the slowdown in credit growth has undershot its own projections.

In its monetary policy statement for the first half of the fiscal year, Bangladesh Bank revised its credit growth target from 10 percent to 9.80 percent.

In February, Governor Ahsan H Mansur said the policy interest rate would remain at 10 percent until inflation eases, adding that the rate would be lowered once inflation comes under control.