B Mirror Report: Bangladesh Bank has relaxed key lending restrictions for commercial banks, marking a major shift from its recent tight monetary stance as the country struggles with slowing economic activity, high inflation and mounting stress in the banking sector.
The central bank’s latest policy changes include raising the single-borrower credit exposure limit to 25 per cent of a bank’s regulatory capital and easing restrictions on large loans for banks with higher non-performing loan (NPL) ratios.
Analysts and economists warn that the measures could increase financial vulnerabilities, fuel inflationary pressures and concentrate banking resources among large corporate groups.
Under the revised framework, banks with NPL ratios of up to 10 per cent will now be allowed to allocate as much as 50 per cent of their total advances to large loans. Previously, this facility was available only to banks with NPL ratios below 3 per cent.
Bangladesh Bank has also introduced a Tk 10-billion refinancing scheme for small and medium enterprises outside Dhaka and proposed another Tk 200-billion fund aimed at reviving closed industrial units to support employment generation.
The policy changes come at a time when inflation has remained above 9 per cent despite prolonged monetary tightening. Economists fear that fresh liquidity injections through refinancing support and relaxed lending rules may complicate inflation management further.
Zahid Hussain, former lead economist of the World Bank’s Dhaka office, questioned the timing of the move.
“The banking sector is already facing serious structural vulnerabilities. It is difficult to understand why Bangladesh Bank would choose this moment to expand those risks further,” he told bdnews24.com.
He warned that politically influential business groups could take advantage of the relaxed lending environment, citing Bangladesh’s troubled history of large corporate loans and rising defaults.
According to Bangladesh Bank data, non-performing loans in the banking sector stood at around Tk 5.45 trillion by December 2025.
Banking experts also expressed concern that financially weak banks could face greater stress if they aggressively expand corporate lending under the new rules.
Selim RF Hussain, former chairman of the Association of Bankers, Bangladesh (ABB), said banks already struggling with capital shortages and provisioning gaps should ideally have been excluded from the facility.
“If weaker institutions aggressively pursue large corporate lending under these relaxed conditions, their financial stress could intensify further,” he said.
Economists also cautioned that easier access to large bank loans may slow the development of Bangladesh’s capital market by reducing incentives for companies to raise funds through bonds or equities.
Despite the criticism, Bangladesh Bank defended the policy shift, arguing that employment generation and economic activity currently require greater priority than inflation control.
Central bank spokesperson and Executive Director Arief Hossain Khan said the immediate focus is to support job creation and improve purchasing power.
“Inflation is a secondary concern for someone who has no purchasing power,” he said.
“While reducing inflation remains an important responsibility, our broader focus right now is employment generation. If inflation rises slightly in the short term, we will recalibrate accordingly.”
The latest measures signal a clear policy pivot toward economic stimulus, even as concerns grow over banking-sector stability, rising bad loans and persistent inflationary pressure.
