Cenbank cuts private sector credit growth target to 6.8% for December
The central bank expects credit growth to recover gradually while retaining its current monetary policy stance and reintroducing a 4% cap on banks' interest rate spreads
Highlights
- Bangladesh Bank lowers December private sector credit growth target to 6.8%
- Domestic credit growth target set at 10.5% under new monetary policy
- Repo rate unchanged; 4% cap on lending-deposit spread to be reinstated
- Cenbank cites inflation, weak investment and global risks as key economic challenges
- Energy shortages and Middle East tensions remain major risks to the economic outlook
The Bangladesh Bank has lowered its private sector credit growth target to 6.8% for December under its Monetary Policy Statement for the first half of FY2026-27.
The central bank unveiled the new monetary policy on its website today (30 June).
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Private sector credit growth stood at 5% in May, well below the 8.5% target set for the whole of FY2025-26. Despite the shortfall, the central bank expects lending to recover to 6.8% by December.
The policy also sets the domestic credit growth target at 10.5%.
A Bangladesh Bank deputy governor told the media that the central bank would maintain its current policy rate while reintroducing a 4% cap on the spread between banks' lending and deposit rates to prevent excessive lending charges.
"We will maintain the current policy rate. At the same time, the 4% cap on the lending-deposit rate spread will ensure banks cannot charge excessive interest. We expect private sector credit growth to reach 7% by December and around 8% by next June," the deputy governor added.
According to the Monetary Policy Statement, the central bank said Bangladesh's economy is passing through a fragile recovery marked by elevated inflation, sluggish investment, employment pressures, energy supply uncertainty, high non-performing loans (NPLs) and growing global economic risks.
It noted that geopolitical tensions in the Middle East could disrupt oil and fertiliser supply chains, increasing import costs and intensifying domestic inflationary pressures.
The MPS said prolonged global shocks – including the Covid-19 pandemic, the Russia-Ukraine war and the ongoing Middle East conflict – have weakened the taka, raised import costs and eroded the working capital of many manufacturing firms and cottage, micro, small and medium enterprises (CMSMEs), leaving many factories operating below capacity.
The central bank also said commercial banks have become increasingly cautious in extending loans due to rising loan defaults and higher government borrowing, resulting in surplus liquidity being channelled into government securities instead of private sector investment.
Despite these challenges, Bangladesh Bank expects economic growth and investment to recover gradually in the coming months, supported by the FY2026-27 budget, targeted credit support and reforms in the financial sector.
However, it warned that energy shortages, structural inflation, financial sector stress and external uncertainties remain key downside risks to the outlook.
