New investment in the country has virtually come to a halt. With expected investments failing to materialize in the industrial and business sectors, the overall economy has also slowed significantly. The government is not taking on any development projects beyond routine activities. The private sector, too, is not launching any new industries or expanding existing ones. As a result, demand for loans from the country’s banking sector has nearly fallen to zero. At the same time, no companies are getting listed on the capital market.
An analysis of central bank data shows that in June 2025, bank loan growth in the private sector hit the lowest level in history. By July, instead of growth, the outstanding loans to the private sector turned negative. At the end of June, the last month of FY 2024–25, outstanding loans to the private sector stood at BDT 17.47 trillion. By July, the first month of FY 2025–26, the figure had dropped to BDT 17.42 trillion. This indicates that instead of growth, the outstanding loans fell by BDT 50.53 billion in the first month of the fiscal year.
To control high inflation, the central bank has been announcing contractionary monetary policies for three consecutive fiscal years. As part of this contractionary stance, the loan growth target for the private sector was set at 9.8 percent in FY 2024-25. But by the end of the fiscal year, the banking sector fell far short of that goal. In FY 2024–25, loan growth in the private sector reached only 6.5 percent. In response, Bangladesh Bank lowered the loan growth target to 7.2 percent when announcing the monetary policy for the current FY 2025–26. However, this target also remained unmet as of the end of July. According to Bangladesh Bank, from July 2024 to the same month in the current fiscal year, loan growth stood at 6.52 percent.
The General Economics Division (GED) of the Planning Commission has described the prevailing loan growth in the private sector as historically the lowest. In its September “Monthly Economic Update and Outlook,” the division said the growth rate falling far below the central bank’s target reflects business reluctance, high interest rates, political and economic uncertainty, and the cautious lending policies of banks.
The GED report stated that one of the current weaknesses of the economy is the slow pace of development spending. In the first two months of the new fiscal year (July and August), only 2.39 percent of the Annual Development Program (ADP) was implemented, down from 2.57 percent in the same period last year. While there was a slight improvement in August, overall progress remains far below expectations. Structural issues in project implementation have yet to be resolved.
Meanwhile, revenue collection has also fallen short of targets. In August 2025, revenue earnings stood at BDT 271.62 billion, against a target of BDT 308.89 billion. This indicates a shortfall of BDT 37.27 billion in just one month. However, compared to the same period of 2024, revenue earnings increased by 17.63 percent, which offers some hope, though the GED report noted that the goal remains far from being achieved.
Business leaders have met several times with Governor Dr. Ahsan H Mansur to demand solutions to the banking sector crisis, including a reduction in interest rates. They have also held meetings with BNP Standing Committee member and former Commerce Minister Amir Khasru Mahmud Chowdhury. Recently, a delegation of leading businesspeople met with Jamaat-e-Islami’s Amir Dr. Shafiqur Rahman. In all these separate meetings, business leaders pressed for improvements in the business and investment climate.
In the prevailing situation, entrepreneurs are trying to keep their existing businesses alive rather than focusing on expansion, said Azam J Chowdhury, Chairman of East Coast Group. Speaking to Bonik Barta recently, he said, “Those of us involved in business are trying to figure out how to keep our current operations running. I am not aware of anyone thinking about expanding or taking on new projects. The government, on its part, has offered no guidance on this. There are no discussions with anyone about expanding businesses or creating employment.”
Azam J Chowdhury, who was Chairman of private-sector Prime Bank for many years and remains on its board, added, “Getting loans from banks has now become quite rare. And starting new businesses is difficult with such high interest rates, VAT, and taxes. The government has increased VAT on various goods and services without any consultation. This has added further pressure on the private sector. Things cannot go on like this.”
At the start of FY 2023–24, Bangladesh Bank announced a contractionary monetary policy, citing the need to control high inflation. At that time, steps were taken to raise interest rates on bank loans. As part of this process, the central bank increased its policy rate (repo rate). Since then, bank loan interest rates have continued to rise. The policy rate was raised from 5 percent to 10 percent, and it remains in place. The combination of a liquidity crunch and the higher policy rate has driven bank loan interest rates up since June 2023. Interest rates on loans have climbed from a maximum of 9 percent to nearly 16 percent. Yet the public has seen no benefit from these higher rates. On the contrary, even as private sector credit growth hit record lows, inflation rates continued to surge.
Some banks, however, have taken full advantage of the higher interest rates despite the lack of inflation relief. By purchasing high-interest government treasury bills and bonds and collecting higher rates from borrowers, leading banks posted record operating and net profits in 2024. Financial statements from top banks show that much of 2024’s income came from treasury bills and bonds, which carried interest rates between 11 and 13 percent throughout the year. Because lending to the government at high interest was considered safer, banks pulled back from the private sector, according to industry insiders.
Bank executives say that banks are not issuing new loans in any significant sense. The annual loan growth that appears on paper has come mainly from unpaid interest and higher rates, not from fresh lending. Such a drought in private sector credit has never been seen before. Yet the country’s economic growth and job creation depend heavily on the private sector, which drives most of the production, marketing, and service industries. Without increased private investment and credit flow, the economy will not regain momentum.
Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank (MTB), said that banks are not issuing new loans, and entrepreneurs are not taking them either. He told Bonik Barta, “Most bank loans start with opening import LCs. The import situation has been poor for the past two years. Imports of capital machinery are especially low. Banks are not issuing new loans in any real sense. Bankers now see investing in government bills and bonds as safer and more profitable than lending. This is why private sector loan balances have turned negative.”
He further said, “The high loan growth in the private sector over the past one and a half decades was also abnormal. Loans were siphoned out of banks through fraud. The 11–12 private banks that saw this abnormal lending are now crippled. Five banks are heading toward mergers. These banks do not have the capacity to issue even 1 taka in new loans. Under these circumstances, it is only natural that loan growth is not happening.”
Not only most private banks, but even state-owned banks have seen a decline in their loan portfolios over the past six months. According to central bank data, as of December 2024, the total outstanding loans of the four major state-owned banks—Sonali, Janata, Agrani, and Rupali—stood at BDT 3.12 trillion. Instead of increasing, it fell by BDT 83.78 billion over the following six months. By the end of June 2025, their outstanding loans had dropped to BDT 3.04 trillion.
Sonali Bank Chairman Mohammad Muslim Chowdhury told Bonik Barta, “There is virtually no new investment in the private sector. Given the current economic and political situation, entrepreneurs are unwilling to invest. If they are not interested, where will we lend?”
The economic stagnation has also affected companies listed on the country’s capital market. Currently, 360 companies are listed on the country’s stock market, including 200 in the manufacturing sector. These include large local and multinational corporations. Bonik Barta analyzed data on investment announcements made by manufacturing companies listed on the Dhaka Stock Exchange (DSE) between August 2024 and 24 September 2025. It found that during this one-year period, only 12 companies announced plans for business expansion, with total declared investments amounting to just BDT 21.13 billion.
The capital market’s contribution to industrial financing in the country is already minimal. On top of that, no new companies have been listed through initial public offerings (IPOs) in the past one and a half years. Market analysts said this is the longest stretch without IPOs in the history of the country’s capital market. According to them, the slowdown began in early 2022 and continues to this day. Because of this prolonged downturn, entrepreneurs are hesitant to bring their companies to the market through IPOs. Although the market showed some upward movement from the last week of May 2025, adding nearly 1,000 points to the index in three months, investor confidence remains shaky, leading to another decline in September. At one point, daily transactions in the market exceeded BDT 10 billion, but they have now fallen below that mark again.
Recently, the Board of Directors of the DSE held a meeting with the Executive Committee of the Bangladesh Association of Public Listed Companies (BAPLC). At the meeting, BAPLC representatives said the capital market lacks a proper system for determining IPO prices. They also pointed to the absence of an integrated digital reporting system and the minimal tax difference between listed and unlisted companies. These issues, they said, are obstacles to bringing strong companies into the market and need to be addressed for the sake of market development.
At the meeting, BAPLC Chairperson Rupali Haque Chowdhury said, “We need to significantly expand our country’s capital market. To do so, we can discuss what steps should be taken. Instead of focusing too much on problems, we must talk more about solutions. If we can bring in small companies with innovative ideas and business plans, business activities will grow. At the same time, compliance requirements for existing listed companies should be made easier.”