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Banking Sector Liquidity vs. Private Sector Credit Challenges
Comparison of liquidity levels and loan indicators in the Bangladeshi banking system.
Primary Sources
Banks flush with cash, but businesses starved of credit: DCCI
Dhaka Chamber of Commerce & Industry (DCCI) President Taskeen Ahmed on Wednesday (15 April) said Bangladesh's banking sector is facing a "paradoxical landscape" where banks are holding record excess liquidity but private sector borrowers – particularly industries and Cottage, Micro, Small and Medium Enterprises – are struggling to access credit, hampering investment and growth. He made the remarks while presenting a paper titled "Synergising the Banking Sector: Lenders' and Borrowers' Perspective" at a focus group discussion at the DCCI auditorium. According to a presentation, total liquid assets in the banking system have risen to Tk6,26,044.90 crore, while excess liquidity stood at Tk3,21,255.47 crore, indicating banks are accumulating funds as a buffer against credit risk instead of deploying them for productive lending. At the same time, private sector credit growth slowed to 6.03%, reflecting a contraction in lending despite strong deposit growth. The paper noted that the overall non-performing loan ratio reached 31.2% by December 2025, while industrial loan recovery declined by more than 50% year-on-year, creating stress across the real economy. Overdue industrial loans stood at Tk71,066.82 crore, while CMSME overdue loans accounted for 35.43%, highlighting mounting financial distress among borrowers. Taskeen observed that rising non-performing loans, capital shortfalls and stricter risk governance have pushed banks towards defensive lending strategies. Capital shortages in 23 banks amounting to Tk2.82 lakh crore have further increased risk aversion, slowing credit disbursement and limiting access to finance for productive sectors. He also pointed out a widening divergence between public and private sector credit. Government borrowing from banks surged to Tk73,035 crore during July-January of fiscal year 2025-26, marking a sharp increase compared to Tk9,442 crore in the same period of FY25, which has further crowded out private sector lending. From the borrowers' perspective, the presentation highlighted severe revenue pressures, high lending rates and limited access to working capital. With the policy rate at 10%, lending rates climbed to around 14-15%, increasing repayment burdens and discouraging new investments, particularly for SMEs operating with thin margins. The paper warned that the banking sector is caught in a vicious cycle where rising defaults lead to tighter lending standards, which in turn constrain business activity and weaken repayme...
Banks drowning in cash while businesses wither, laments DCCI
He made the remarks while presenting a paper titled "Synergising the Banking Sector: Lenders' and Borrowers' Perspective" at a focus group discussion held at the DCCI auditorium. According to the presentation, total liquid assets in the banking system have risen to Tk 6,26,044.90 crore, while excess liquidity stood at Tk 3,21,255.47 crore.
Liquidity surges, credit growth slows in banking sector
As non-performing loans increase, banks are reducing lending. This leads to a slowdown in business activities, which in turn hampers loan repayments. Consequently, NPLs continue to rise, further intensifying the credit contraction. To stabilize the banking sector, DCCI has made several recommendations.
NDB Banking Scandal Raises Alarms Over Regulation And Stability
During a high-level parliamentary review, chaired by Harsha de Silva, officials from the Central Bank of Sri Lanka faced tough questioning over delays in identifying and disclosing the fraud. The Committee stressed that such lapses were unacceptable, particularly in a sector where public confidence is paramount.
