Private sector credit growth in Bangladesh has fallen to its lowest level in four years, signaling deepening challenges for the country’s economy as investment remains stagnant and business confidence weakens.

According to the latest Bangladesh Bank data, private sector credit growth slipped to 6.23% in October 2025, down from 6.29% in September and sharply lower than 8.30% in October 2024. Economists and bankers say the persistent decline reflects a sharp fall in new investment beginning in mid-2024.

Analysts note that with businesses hesitant to expand, demand for capital machinery has dropped, resulting in lower borrowing needs. Imports of capital machinery decreased by around 9.5% during July–October, central bank data show.

Zahid Hussain, former lead economist at the World Bank’s Dhaka office, said the sluggish credit growth is primarily driven by weak investment activity. “There is no sign of a turnaround in investment, and that is the biggest factor behind the slowdown,” he said, adding that while fraudulent borrowing practices have declined and dollar shortages have eased, the ongoing energy crisis has emerged as a major obstacle to factory operations.

Banks are also grappling with an unprecedented rise in non-performing loans (NPLs), which have surged to Tk6.5 lakh crore, about 35% of total loans. The high volume of defaulted loans has constrained banks’ ability to extend fresh credit. Many institutions are under liquidity stress and becoming increasingly cautious.

Dr Ashikur Rahman, principal economist at the Policy Research Institute of Bangladesh, noted that both supply and demand factors are at play. “NPLs are very high, so banks are very careful about whom they lend to. Banks are looking for safe areas for credit,” he said, adding that stagnation in new investment is likely to continue for at least the next three months.

Bankers say political uncertainty ahead of the national election has further dampened investor sentiment. “Political uncertainty has led to cautiousness among investors, resulting in delays in new investment decisions,” said NRBC Bank Managing Director and CEO Md Touhidul Alam Khan.

Business leaders echoed these concerns, citing unstable law and order conditions and a severe energy and gas supply crisis. DCCI President Taskeen Ahmed said many entrepreneurs are struggling simply to maintain existing operations. “In a country where law and order is not stable, on what grounds will businessmen make new investments?” he asked, adding that it may take up to 18 months after the election for an investment-friendly environment to emerge.

High bank loan interest rates continue to burden businesses, said BKMEA President Mohammad Hatem, making operations increasingly difficult.

With lending slowing, banks have turned heavily toward government securities—treasury bills and bonds—for income. Reduced loan demand has prompted a shift in balance sheets, with investment income becoming a major earnings source for traditional banks. BRAC Bank, for instance, saw its investment income jump nearly four-fold, reaching Tk2,880 crore in 2024, compared to Tk700–800 crore annually between 2020 and 2022.

Bankers and economists agree that restoring credit growth will require political stability, stronger governance in the banking sector, improved NPL recovery, and adequate liquidity support to rebuild confidence among lenders and investors.