United News of Bangladesh

Dhaka Chamber of Commerce & Industry (DCCI) President Taskeen Ahmed on Wednesday said Bangladesh’s banking sector is facing a “paradoxical landscape” where banks are holding record excess liquidity but private sector borrowers – particularly industries and CMSMEs – 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 held at the DCCI auditorium. According to the presentation, total liquid assets in the banking system has risen to Tk 6,26,044.90 crore, while excess liquidity stood at Tk 3,21,255.47 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 contraction in lending despite strong deposit growth.  The paper noted that the overall non-performing loan (NPL) 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 Tk 71,066.82 crore, while CMSME overdue loans accounted for 35.43%, highlighting mounting financial distress among borrowers.  Taskeen observed that rising NPLs, capital shortfalls and stricter risk governance have pushed banks towards defensive lending strategies. Capital shortages in 23 banks amounting to Tk 2.82 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 Tk 73,035 crore during July-January of fiscal year 2025-26, marking a sharp increase compared to Tk 9,442 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 repayment capacity, ultimately creating more NPLs and further credit tightening.  To address the situation, Taskeen proposed a three-pillar “synergy framework” focusing on stabilising the banking system, expanding credit and strengthening governance. Key recommendations included enforcing NPL reduction targets, prosecuting wilful defaulters, restoring capital adequacy, and completing asset quality reviews of vulnerable banks.  He also called for reducing SME lending rates through credit guarantee schemes, expanding digital financial inclusion, diversifying lending portfolios and developing alternative financing channels to ease pressure on bank financing.  The DCCI president further stressed implementing risk-based supervision, strengthening cybersecurity, investing in digital credit infrastructure and enforcing Basel III compliance to ensure long-term resilience of the banking sector.  He noted that stronger coordination between lenders and borrowers is essential to restore confidence, revive private investment and support sustainable business growth in Bangladesh.