Private sector loan growth in Bangladesh has dropped to its lowest level on record, registering at 7.15% in January, down from 7.28% in December.
Recent reports indicate that this is the lowest growth rate observed in recent history, with the last comparable dip occurring in May 2021, when it fell to 7.55% in the aftermath of the COVID-19 pandemic.
Historically, private sector loan growth has predominantly remained in double digits.
Banking sector insiders attribute this decline to soaring interest rates, which have escalated business costs and dampened investment appetite.
Although the foreign exchange crisis has somewhat eased, various economic challenges persist.
Moreover, concerns over political stability have further exacerbated the situation.
Adding to the distress, deposit growth has fallen below 7.5%, reducing the availability of investable funds for banks.
Compounding this, ongoing shortages in electricity and gas continue to hinder industrial activity.
Additionally, following the recent political transition, many individuals with substantial financial resources have reportedly fled the country, further constraining liquidity and investment.
According to Bangladesh Bank data, as of January, the total outstanding private sector loans stood at Tk16.80 lakh crore, compared to Tk15.67 lakh crore in the same month of the previous year.
Despite this growth, the current rate is significantly lower than the prevailing average lending rate, which has risen to nearly 12%, up from below 8% a year ago.
Bangladesh Bank records dating back to the 2005-06 fiscal year indicate that private sector loan growth has only once fallen below 8%—in May 2021, when it stood at 7.55% in the post-pandemic period.
In stark contrast, the highest private loan growth was recorded at 25.18% in the 2007-08 fiscal year, followed by 24.24% in the subsequent year, a period marked by extensive stock market investments financed through borrowed capital.
After the stock market crash of 2010, the central bank imposed tighter controls on private sector lending.
Nevertheless, until November 2019, growth remained consistently in double digits before falling to 9.87% in that month.
