Private sector credit growth remained slow at 6.58% in November

Highlights:

• Credit growth fell to 6.58% at the end of Nov
• In Nov 2024, credit growth stood at 7.66%
• Growth reached double digits in July 2024, at 10.13%
• Slowdown reflects decline in new investment
• Capital machinery imports fell by 16% during Jul-Nov
• Political uncertainty, high interest rates, energy crisis behind slowdown

Private sector bank credit growth has remained stuck below 7% for six consecutive months. As of the end of November 2025, growth fell to 6.58% – below the target set by Bangladesh Bank – raising renewed concerns about the country's investment climate.

Economists and bankers say this slowdown in private sector credit growth mainly reflects a decline in new investment in the country. They note that weakening credit growth signals subdued investment demand, reduces capital formation, and can slow economic growth, employment creation and export competitiveness.

Distinguished Fellow of the Centre for Policy Dialogue (CPD) Professor Mustafizur Rahman said that without new investment, demand for bank credit in the private sector does not increase. "The current credit growth indicates that new industrial and expansionary investments in the country are very limited," he said.

Infographics: TBS

Bankers echo this view, saying entrepreneurs are reluctant to take new loans due to high interest rates, policy uncertainty and weak demand.

Mohammad Ali, managing director of Pubali Bank Limited, said, "Investment will increase once a business-friendly environment is created after the election. And as investment rises, borrowing from banks will also increase. That will lead to higher private sector credit growth."

He added, "Low business activity in the private sector indicates that imports of capital machinery have declined."

Mustafizur Rahman believes that lower investment will worsen unemployment, which in turn will reduce GDP growth.

According to Bangladesh Bank data, settlement of capital machinery imports fell by more than 16% during the July-November period.

As of the end of November 2025, private sector credit growth has remained below 7% for six straight months.

In November 2024, private sector credit growth stood at 7.66%. Bangladesh Bank data show that growth has remained in single digits for 16 consecutive months.

The last time it reached double digits was in July 2024, at 10.13%. From August that year onward, private sector credit growth continued to decline, reaching 6.23% in October 2025—the lowest level on record, according to experts.

Bangladesh Bank's projection for December 2025 is 7.2%. This means the November credit growth figure was even lower than the central bank's target, indicating that businesses are borrowing significantly less than what Bangladesh Bank had anticipated for the private sector.

Economists and bankers point to several reasons behind the decline in private sector credit and warn that it has multiple repercussions for the economy.

Professor Mustafizur Rahman said the primary reason for the fall in demand for private sector bank credit is the sharp decline in new investment. "The more new investment takes place, the more private sector credit grows. The current situation clearly shows that new investment is very low, which is why credit growth has fallen significantly," he said.

He added that the lack of new investment has also led to a drop in capital machinery imports.

Many large businesses are operating slowly, and many others have shut down.

Senior bank officials said that following the fall of the Awami League government, many businesses have closed, while those still operating are far from running at full capacity. Several factories belonging to groups such as Nassa, Beximco and Gazi have shut down. As these factories are inactive, they are no longer borrowing from banks. When operational, these factories used to import capital machinery. Even firms that remain open have cut production by 60 to 70% compared to earlier levels.

Mohammad Ali of Pubali Bank said many large businesses shut down after the government's fall, while others are running at a very slow pace. "Top business groups are the largest borrowers from banks because their operations are big and require substantial financing," he said.

Political uncertainty creates unfavourable investment environment 

Business owners are reluctant to make new investments due to the prevailing political situation. Various incidents associated with what is being described as a "mob culture" have created an environment that discourages investment. Business leaders say as long as political instability persists, new investment will not come.

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said, "If the country is stable, businesses will invest. If it is unstable, they will not – it's that simple. No one will invest by taking unnecessary risks. Losses ultimately fall on business owners. Given the current situation, new investment is not possible. Even after the election, it cannot be guaranteed that conditions will normalise. Investment will rise only if a new, business-friendly environment is created after the election."

He added, "The current 'mob culture' is not business-friendly. Unless this culture is eliminated, neither foreign nor local investors will come. Before making any new investment, businesses assess the law and order situation, and everyone can see what the current situation is like."

Mustafizur Rahman said, "Given the present political conditions, it is unrealistic to expect new investment. However, after a credible election, private sector credit growth may begin to recover."

Energy crisis discourages new investment

Businesses are struggling to operate factories properly due to gas shortages, a problem that has intensified over the past several months. As a result, many firms are unable to produce at desired levels and are incurring losses by year-end. Business owners say repeated appeals to the government have failed to resolve the issue, and business expansion has slowed as a consequence.

Mohammad Hatem said, "There is a serious shortage of gas and electricity for new businesses. Before investing, I have to think whether I will even get gas. The government is currently unable to ensure uninterrupted gas and power supply. I could not operate my own factory properly due to these shortages, which increased costs and reduced profits."

He added, "If you import machinery worth Tk50 crore and cannot operate it properly for three years, the extent of the losses is obvious."

A senior private bank official said many businesses are facing difficulties due to gas and power shortages, discouraging them from making new investments. Energy insecurity, he said, has become one of the biggest challenges for businesses.

High interest rates reduce business profitability

Mohammad Hatem said bank lending rates are currently between 15% and 16%, significantly increasing business costs. "Because of high interest rates, businesses are unwilling to expand. Until lending rates come down, new investment is simply not feasible. No business can survive on high-interest loans," he said.

He also criticised tax collection practices, saying the way the NBR collects taxes is unfriendly to business and makes operations increasingly difficult.

Mustafizur Rahman said rising inflation has pushed up costs across all sectors. "Inflation remains high, though Bangladesh Bank says it will be able to bring it down within the next six months. If inflation falls below 7%, the policy rate could be reduced, which would then lower lending rates," he said.

Banks turn to govt securities for income

As private sector lending slows, banks have increased their investment in treasury bills and bonds. A senior private bank official said weak loan demand has pushed banks toward these instruments. Meanwhile, the government has been borrowing heavily from banks through treasury bills and bonds, even taking an additional Tk10,000 crore outside the calendar during the October–December quarter.

With limited scope for private investment, banks are investing in government securities, earning around 11% interest with virtually full security.

A major share of traditional banks' income now comes from such investments.

Although early 2025 raised concerns over rising deposit rates, persistent inflation, weak loan demand, squeezed margins and political uncertainty, the opposite has unfolded.

Private banks – particularly stronger ones – have seen profits grow not through loan expansion but through substantial earnings from government securities, which have become the sector's new lifeline and reshaped bank balance sheets.