Dhaka:In an appeal to Bangladesh Bank, Business Initiative Leading Development (BUILD) has called for a focus on reviving private sector credit growth, reducing the lending-deposit interest rate spread, and addressing non-performing loans in its first-ever Quarterly Monetary Policy Statement for October-December 2026.
According to Bangladesh Sangbad Sangstha, BUILD Chief Executive Officer Ferdaus Ara Begum welcomed the quarterly monetary policy statement, emphasizing that increased transparency and predictability in monetary policy would support business confidence and assist in investment planning.
The Monetary Policy Committee has lowered the policy repo rate to 9.50 percent from 10 percent to aid economic recovery while continuing efforts to control inflation. Despite this, BUILD expressed concerns that actual borrowing costs remain high, between 13 percent and 17 percent, which contributes to the slow growth of private sector credit, currently at 4.75 percent.
While the Standing Lending Facility rate is set at 11 percent, effective lending rates for many SMEs and CMSMEs stay higher due to risk premiums, processing charges, and bank-specific spreads. BUILD urged the central bank to take measures to narrow the lending-deposit interest rate spread to ensure affordable credit for businesses.
BUILD highlighted the banking sector's challenges, noting that the non-performing loan ratio had reached 32.78 percent, which undermines bank capital and weakens monetary policy transmission. It urged Bangladesh Bank to announce a clear, time-bound strategy for resolving non-performing loans, supported by robust governance and recovery mechanisms, to improve the banking sector's health.
Concerns were also raised that the decrease in headline inflation to 8.26 percent in August could be jeopardized by a fuel price hike in late September. Higher fuel prices could increase transport, production, and consumer costs, potentially reversing recent progress in containing inflation. Additionally, external risks are heightened by volatility from the Middle East conflict and disruptions in the Strait of Hormuz.
Employment generation should be prioritized in monetary policy amid sluggish industrial growth, which fell sharply from 6.82 percent in the first quarter to minus 0.28 percent in the third quarter. Elevated borrowing costs, external volatility, and higher fuel prices are adding pressure on businesses, BUILD emphasized the need to balance inflation control with economic recovery and employment creation.
BUILD called for a clear monetary policy transmission framework that extends beyond policy rate monitoring and establishes links between monetary policy and private sector investment, industrial production, SME credit, and employment. It also recommended monitoring working capital availability, collateral requirements, credit approval times, sectoral credit flows, and the gap between the policy rate and effective lending rates.
Restoring confidence in financial intermediation requires effective policy rate transmission, a narrower lending-deposit spread, and a credible strategy for resolving non-performing loans, BUILD stated. Greater policy predictability and stronger banking-sector governance would further support productive private investment and sustainable economic growth.