Bangladesh Policy Rate Cut May Fail to Revive Private Credit

Bangladesh's central bank, the country's main bank, made borrowing cheaper by lowering its policy rate to 9.5%.

It did this to help banks that are struggling and to get businesses to borrow more.

But a report from Asia Times says this might not work.

Businesses are borrowing very little right now—in May, loans to private companies grew only about 5% compared with last year.

That is a slow pace for a country that wants to grow quickly.

Meanwhile, loans to the government grew by more than 20%.

Nearly a third of all bank loans are not being paid back, which makes banks scared to lend.

The World Bank says the banking system's safety cushion is in negative territory.

The report says the real problem is not the cost of borrowing money, but that businesses do not have good reasons to borrow, such as reliable electricity and gas.

So cheaper loans alone may not fix the problem.