BUILD urges BB to revive private sector credit growth

Business Initiative Leading Development (BUILD) has urged Bangladesh Bank (BB) to focus on reviving private sector credit growth, reducing lending-deposit interest rate spreads and resolving non-performing loans (NPLs) in its first-ever Quarterly Monetary Policy Statement (QMPS) for October-December 2026.

In a statement, BUILD Chief Executive Officer Ferdaus Ara Begum today welcomed the quarterly monetary policy statement, saying greater transparency and predictability in monetary policy would help restore business confidence and facilitate investment planning.

The Monetary Policy Committee has reduced the policy repo rate to 9.50 percent from 10 percent to support economic recovery while continuing efforts to contain inflation.

However, BUILD expressed concern that actual borrowing costs remain between 13 percent and 17 percent, contributing to sluggish private sector credit growth, which stands at just 4.75 percent.

Despite the Standing Lending Facility (SLF) rate being set at 11 percent, effective lending rates for many small and medium enterprises (SMEs) and cottage, micro, small and medium enterprises (CMSMEs) remain considerably higher after accounting for risk premiums, processing charges and bank-specific spreads, the statement said.

BUILD urged the central bank to take effective measures to narrow the lending-deposit interest rate spread and ensure affordable credit for businesses.

Highlighting the challenges the banking sector is facing, BUILD said the NPL ratio had reached 32.78 percent, eroding bank capital and weakening monetary policy transmission.

It called on Bangladesh Bank to announce a clear, time-bound strategy for resolving non-performing loans, backed by stronger governance and effective recovery mechanisms, to restore the health of the banking sector.

BUILD also expressed concern that the easing of headline inflation to 8.26 percent in August could be undermined by the fuel price hike in late September.

Higher fuel prices could increase transport, production and consumer costs, reversing recent progress in containing inflation, it said, adding that volatility arising from the conflict in the Middle East and disruptions in the Strait of Hormuz had created additional external risks.

The organisation said employment generation should be a priority of monetary policy amid sluggish industrial growth. Industrial growth deteriorated sharply from 6.82 percent in the first quarter to minus 0.28 percent in the third quarter, according to the statement.

Elevated borrowing costs, external volatility and higher fuel prices are creating additional pressures on businesses, BUILD said, stressing the need to balance inflation containment with economic recovery, investment and employment generation.

The statement further called for a clear monetary policy transmission framework that goes beyond monitoring the policy rate and establishes links between monetary policy and private sector investment, industrial production, SME credit and employment.

It also recommended monitoring the availability of working capital, collateral requirements, credit approval times, sectoral credit flows and the gap between the policy rate and effective lending rates.

Effective transmission of the policy rate, a narrower lending-deposit spread and a credible, time-bound strategy for resolving non-performing loans are essential to restore confidence in financial intermediation, BUILD said.

Greater policy predictability and stronger banking-sector governance would further support productive private investment and sustainable economic growth, it added.