Shrinking space for private sector credit

Crowding out is no longer a trivia for the Bangladesh economy, while the growth of loans and advances in the private sector is below 5 per cent, which is the lowest in the last two decades. Banks are now more likely to invest in government treasury bills and bonds instead of lending to large sectors in order to secure their returns.

This is actually one of the main reasons for the de-growth in loans and advances in the private sector. Government borrowing stood at Tk 460 billion in April 2026, compared to Tk 330 billion in March 2026. Such a significant rise in government borrowing may also slow down GDP growth.

Increasing borrowing rates on loans and advances may temporarily be a manoeuvre to control inflation. However, this is only ancillary, because growth in the private sector often reflects positive outcomes in socio-economic development.

Controlling inflation is essential from a macroeconomic perspective, but it largely depends on the retail level rather than the corporate segment. Moreover, inflation control should be monitored by identifying market syndicates instead of relying solely on preventive monetary measures. Despite various initiatives taken to control inflation, some syndicates still remain untouched. This was clearly observed during the fuel price hike in March.

To expedite the emerging growth of entrepreneurs, loans and advances in the private sector are now essential for banks. Challenges are huge, but the opportunities are even greater.

Kawsik Azad Pronoy

Unit Head

Dutch Bangla Bank

Corporate Business Division