Archive · 6 Aug 2026
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.
Bangladesh's central bank cut its policy rate by 50 basis points to 9.5% last week to ease funding costs for distressed lenders.
A Hong Kong-based Asia Times report says the cut may fail to address an 'alarming slowdown in private investment.'
Credit to private firms grew just 4.98% year-on-year in May, down from 7.17% in the previous year.
Non-performing loans climbed to nearly 5.89 lakh crore taka ($47.65 billion) by late March, exceeding 32% of total outstanding loans.
The World Bank estimated the banking system's capital-to-risk-weighted-assets ratio dipped to -2.6% by end-2025.
- Who
- Bangladesh's central bank, with analysis from Hong Kong-based Asia Times and estimates from the World Bank
- What
- The central bank cut its policy rate by 50 basis points to 9.5% to ease funding costs, amid a slowdown in private credit growth and high non-performing loans
- When
- The policy rate cut was announced last week; credit figures are for May and non-performing loan data is as of late March
- Where
- Bangladesh; the critical report was produced by Hong Kong-based Asia Times with a New Delhi dateline
- Why
- To ease funding costs for distressed lenders and address weak corporate demand, though the report argues the true impediment is a dearth of viable corporate demand
Backers of the Rate Cut
Skeptics of the Rate Cut
Effectiveness of the rate cut
Backers of the Rate Cut
Lowering central-bank funding costs is intended to reduce commercial lending rates and render stalled capital projects viable once again.
Skeptics of the Rate Cut
The true impediment to expansion is not the price of money but a dearth of viable corporate demand; the penalty of idle capacity, backup diesel generators and missed export deadlines far outweighs minor savings on bank loans.
Cause of the private credit slump
Backers of the Rate Cut
The cut aims to address weak corporate demand by easing the funding costs faced by distressed lenders.
Skeptics of the Rate Cut
Infrastructure shortfalls and frequent gas and power interruptions may keep stalled projects from reviving, while high non-performing loans leave weak banks incapable of extending productive credit regardless of central bank policy.
- Policy rate
- 9.5% after a 50-basis-point cut
- Private credit growth (May, YoY)
- 4.98%
- Private credit growth (year earlier)
- 7.17%
- Public sector credit growth
- 20.78%
- Non-performing loans
- Nearly 5.89 lakh crore taka ($47.65 billion), over 32% of total outstanding loans
- Capital-to-risk-weighted-assets ratio
- -2.6% by end-2025 (World Bank estimate)
- Report source
- Asia Times (Hong Kong-based)