Private sector credit growth in Bangladesh has dipped to 6.40 per cent in June 2025, the latest data from Bangladesh Bank reveals - marking a concerning slowdown in lending and signalling deeper economic headwinds amid political transition and financial instability.

This is the lowest level in recent years and the second time this year that credit growth has fallen below the 7 per cent threshold.

Notably, growth has failed to rise above this mark in any month so far in 2025, indicating a persistent contraction in credit expansion.

A growing economic warning sign

Experts warn that the sustained decline in credit flow is not just a banking sector issue – it reflects a broader crisis in investor confidence and economic momentum.

Dr Mustafa K Mujeri, Executive Director at the Institute for Inclusive Finance and Development (InM) and former Chief Economist of Bangladesh Bank, cited multiple factors behind the slump: Political uncertainty following the change in government, social unrest and disruptions in law and order

Deteriorating investor sentiment, and discouraging entrepreneurs from pursuing new ventures or expansions.

“The current environment is not conducive to risk-taking,” said. “Businesses are hesitant, and banks are tightening their belts.”

He also pointed to structural weaknesses in the financial sector: widespread past financial irregularities have left many banks with liquidity constraints, while the rising burden of non-performing loans (NPLs) has made lenders increasingly cautious about extending credit.

Banking sector under pressure

Dr Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD), described the trend as a red flag for the national economy.

“A continuous decline in private credit growth is a symptom of a deeper crisis—both in the banking system and the overall business climate,” he said.

He emphasised the real-world consequences: “Less credit means fewer new industries, stalled business growth, and ultimately, fewer jobs. This directly impacts employment, productivity, and long-term development.”

Outlook remains bleak

Economists believe the situation is unlikely to improve significantly before the upcoming national elections. Delays in the electoral timeline could further erode confidence and deepen the economic slowdown.

Additionally, unresolved trade tensions – particularly the ongoing US tariff issue on Bangladeshi exports – pose a major external risk.

Without a negotiated resolution, export-oriented sectors may face further strain, worsening the outlook for investment and credit demand.

Monthly credit growth trend (2024–2025)

June 2025: 6.40 per cent

May 2025: 7.17 per cent

April 2025: 7.50 per cent

March 2025: 7.57 per cent

February 2025: 6.82 per cent

January 2025: 7.15 per cent

December 2024: 7.28 per cent

With credit growth stagnating below 7 per cent, Bangladesh’s economy stands at a crossroads. Restoring investor confidence, stabilising the banking sector, and ensuring a smooth political transition will be critical to reviving credit flow – and with it, the nation’s economic momentum.

Source: UNB