Private sector credit growth in Bangladesh dropped to 7.15% in January, marking the lowest level in a decade, according to Bangladesh Bank data released on Sunday.

Credit growth last fell to a similar level during the COVID-19 pandemic in May 2021, when it stood at 7.55%. In comparison, the growth rate was 7.26% in December 2023.

The decline follows a downward trend observed since July 2023, when political unrest began affecting economic activity.

Bangladesh Bank’s monetary policy had set a 9.8% credit growth target for January–July, but the latest figures fall well below expectations, even under the tightened money supply strategy aimed at controlling inflation.

Meanwhile, a 33.68% decline in the opening of letters of credit (LCs) for capital machinery imports over the past six months signals reduced investment in new businesses.

Economists warn that slowing credit growth could stifle industrial expansion, reduce investment, and limit job creation.

Syed Mahbubur Rahman, CEO of Mutual Trust Bank, told bdnews24.com that restricted lending is affecting business growth. Banks are now more cautious about lending to struggling factories.

Business leaders argue that high interest rates discourage borrowing, increasing the cost of doing business and further slowing credit demand.