Bangladesh's Private Credit Growth Falls to Its Weakest Pace Since 1993, Even as Money Market Rates Ease

Bangladesh's banks have more cash sitting idle than they have known what to do with for months, and September's numbers show why that is becoming a problem rather than a comfort. Private sector credit grew just 4.17 percent in September, down from 4.75 percent in August, according to provisional Bangladesh Bank data. Senior central bank officials say they cannot recall a slowdown this severe, with growth this weak not seen going back at least to 1993. Over the same month, short-term borrowing costs between banks fell to their lowest levels of the year, a sign that liquidity is piling up even as nobody wants to borrow it.

• Private sector credit growth slowed to 4.17 percent in September, well short of Bangladesh Bank's own projection of 6.8 percent growth through December.
• The call money rate ended September at 8.48 percent, down from 9.25 percent at the start of the month, as interbank liquidity eased.
• Bad loans stood at Tk6,06,555 crore, or 32.78 percent of all disbursed loans, as of end June, limiting how much some banks can safely lend.
• Economists warn that cheap, abundant liquidity will not turn into real investment unless borrowing costs, energy supply and policy confidence all improve at once.

A credit slump officials say they have not seen before

The September credit figure is not just a bad month, it is a historical outlier. Central bank officials told reporters they could not recall private sector credit growing this slowly at any point since 1993, which puts the current slump in a different category from the usual seasonal dips. Bangladesh Bank had projected 6.8 percent credit growth by the end of December in its latest monetary policy statement; September's 4.17 percent leaves a wide gap to close in the final quarter of the calendar year, and most bankers see little reason to expect a sudden reversal.

The central bank's own quarterly monetary policy statement was candid about what the number represents. It said weak credit demand signals subdued investment, elevated borrower risk, uncertain returns and impaired balance sheets at a number of banks. It also flagged a growing split within the sector: banks' total liquid assets have risen sharply, but that liquidity is unevenly distributed, with stronger banks sitting on substantial surplus cash while weaker, more deposit-starved banks still struggle to fund their obligations.

Why businesses are not borrowing

Economists and bankers point to a tangle of reasons rather than a single cause. An official at a private bank said there are simply no major investment projects in the pipeline right now, reflecting a broader reluctance among businesses to commit to new capacity. Fahmida Khatun, executive director of the Centre for Policy Dialogue, cited high borrowing costs, subdued domestic demand, uncertainty over energy supply, and low confidence in future returns as the main drags on investment appetite.

"Restoring confidence requires consistent policies, better infrastructure and reliable energy," Fahmida Khatun said, adding that lowering the cost of doing business and boosting both domestic and export demand would matter just as much as cheaper credit.

Banker Syed Mahbubur Rahman offered a related but distinct explanation, pointing to inflation's effect on real incomes and trade. He said eroded purchasing power, weak trade flows, higher freight charges and rising oil prices were all weighing on firms' willingness to expand. He also noted a telling detail: money set aside under business stimulus packages is barely being disbursed, not because banks are unwilling to lend it, but because there is little demand for it. Inflation, meanwhile, has stayed stubbornly high, printing at 8.34 percent in September, and the IMF expects the average for the fiscal year to climb toward 10.9 percent, which does little to encourage firms to take on new debt at current rates.

Cheaper money, same hesitation

The money market tells almost the opposite story to the credit numbers, and that contrast is the real story of September. The weighted average call money rate, what banks charge each other for very short-term borrowing, fell from 9.25 percent at the start of September to 8.48 percent by month's end. The monthly average of 8.86 percent was well below July's 9.68 percent, and 118 basis points lower than the same month a year earlier. The repo market moved similarly: its weighted average rate fell 97 basis points during September to a monthly average of roughly 8.90 percent, also down from about 9.70 percent in July and about 105 basis points below September 2025.

Banks are also borrowing differently. Seven-day transactions rose to about half of all money market activity in September, up sharply from roughly 9 percent back in May, overtaking overnight deals, which fell to about 27 percent of the total. That shift toward slightly longer short-term borrowing is itself a signal that banks expect the current liquidity conditions, easy money but weak demand for loans, to persist for a while rather than resolve within days.

Indicator	August 2026	September 2026
Private sector credit growth (YoY)	4.75%	4.17%
Call money rate (monthly average)	>9.68% (Jul)	8.86%
Inflation (YoY, BBS)	8.26%	8.34%

What it means for you

For a saver, falling interbank rates are an early signal that banks may eventually trim deposit and FDR rates if the liquidity glut persists, so this is a reasonable moment to compare current fixed deposit offers with an FDR and DPS calculator before locking in a long tenure. For a small business owner weighing a loan, the irony of this moment is that banks have cash to lend and may be more willing to negotiate terms even as headline borrowing costs stay high, though approval will depend heavily on how clean your own repayment history and collateral look given how closely banks are now watching asset quality. For the economy more broadly, economists are blunt that abundant liquidity sitting unused in the banking system does not by itself create jobs; without a pickup in demand, more reliable energy supply, and steadier policy, Bangladesh risks a quarter in which banks are flush with cash and still lend less than they did a year earlier.

What comes next

Bangladesh Bank has three months left to close the gap between September's 4.17 percent credit growth and its own 6.8 percent target for the year, a gap few bankers expect to close given the reasons cited for the slowdown. The more interesting question for the fourth quarter may be whether the growing divide between liquidity-rich and liquidity-poor banks forces the central bank to intervene more directly, whether through targeted refinancing schemes or further guidance, rather than simply letting the market sort out where the surplus cash eventually goes.