Strong deposit growth fails to spur private credit expansion: GED report

Strong deposit growth in the banking sector has not translated into robust private sector credit expansion, according to a recent government report.

Banking sector deposits stood at Tk 21.31 lakh crore in August 2026, up 12 percent year-on-year, according to the Economic Update & Outlook September 2026 report prepared by the General Economics Division (GED) of the Bangladesh Planning Commission.

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“This is faster than the 10.01 percent growth recorded a year earlier, so deposit collection has gained momentum,” the report said.

“It suggests that liquidity in the banking system has improved and that depositors’ confidence is recovering,” it added.

In contrast, private sector credit grew by 4.75 percent year-on-year to Tk 18.30 lakh crore in August, below the 6.35 percent growth recorded in the same period the previous year, according to the report.

Private sector credit is likely to remain subdued in the near term if borrowing costs stay high, business confidence recovers only slowly and credit risk remains elevated, the report said.

Credit growth was uneven across sectors. Public sector credit rose by 32.45 percent to Tk 7.22 lakh crore in August, more than double the 14.81 percent growth recorded in the previous year.

“Heavy public sector borrowing may also crowd out private lending. The pace of private credit recovery will therefore be the key indicator to watch,” the report said.

Overall, the gap between deposit growth (12 percent) and private credit growth (4.75 percent) points to ample liquidity that is not being channelled into productive private investment, according to the report.

Policy attention should focus on easing financing costs, improving the investment climate and strengthening the banking sector’s ability to lend, the report said.

“Sustained deposit growth would give banks the resources to support a revival of private credit as macroeconomic conditions stabilise,” the report added.