The Bangladesh Bank’s ongoing contractionary monetary policy, according to the Dhaka Chamber of Commerce and Industry (DCCI), may cause trade, investment, and industrialization operations to stall. The group claims that because of the impact of strict monetary policy, the country’s economic activity is being hindered by a decline in credit flow.

At the end of June 2025, private sector credit growth dropped to 6.4 percent, the lowest level in the previous 22 years, according to a statement released by the DCCI to the media on Thursday, July 31. For the economy, this trend is concerning. The chamber thinks that uncertainties in the business environment, law and order, and credit expansion are making the downward trend worse.

DCCI has stated that the contraction in credit flow has led to a significant rise in non-performing loans, which have reached Tk 5.3 trillion, representing approximately 27.09 percent of the total outstanding loans in the banking sector. This scenario poses a risk to financial stability and presents a substantial challenge to investor confidence.

In light of the declining business confidence, Bangladesh Bank has maintained the policy interest rate at 10 percent, which is exerting considerable pressure on productive sectors, including micro, cottage, small, and medium enterprises, as noted by DCCI. The organization highlights that persistently high long-term interest rates are exacerbating the debt burden in production and investment sectors, thus hindering the overall economic dynamics.

In the current monetary policy period (July-December 2025), the target for private sector credit growth has been further lowered to 7.2 percent, down from 9.8 percent in the previous six months. Conversely, the target for credit growth in the government sector has been raised to 20.4 percent. The Dhaka Chamber indicates that this arrangement will elevate both financial costs and competition for the private sector while addressing the needs of the public sector.

In response to this situation, DCCI has urged for a reduction in the policy interest rate and a relaxation of borrowing terms to enhance credit flow to the business, trade, and industry sectors. They have also suggested extending the loan classification period by six months to assist honest borrowers and prevent them from slipping into the immediate default category.

According to the group, the central bank must keep an eye on structural changes in the financial industry, guarantee credit allocation transparency, and maintain market liquidity in order to guarantee a long-term economic recovery.

In the end, DCCI asserts that a more adaptable, inclusive, and sector-based responsive monetary policy is the only way to preserve macroeconomic stability, boost investment, and rebuild private sector confidence.