Private sector credit growth in Bangladesh has dropped to a 14-month low of 11.23% in April 2023, reflecting weak credit demand amid the current business slowdown. This decline marks the fifth consecutive monthly drop, as businesses adopt a cautious “wait and see” approach due to persistent uncertainty at home and abroad. Official figures from the Bangladesh Bank reveal that banks’ finance to the private sector amounted to Tk 14,57,400 crore in April.
Executive Director of the Policy Research Institute of Bangladesh, warns that credit growth may further decline as deposit growth is also slowing. Deposits grew by 5% at the end of 2022, considerably lower than the 9.6% recorded a year ago. The interest rate cap on loans, introduced in April 2020, has hindered credit growth. Other factors contributing to the slowdown include difficulties in opening letters of credit (LCs), inadequate electricity and gas supply, and a liquidity crisis faced by Shariah-based banks. Additionally, cautious business investments due to political uncertainties ahead of the upcoming general elections have also impacted credit growth.
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