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“There are several reasons for this, including declining production, rising outstanding loans in the industrial sector, a high rate of non-performing loans, reduced credit flow to the private sector despite no liquidity shortage, and increased government borrowing from the banking sector,” he said.

To address the situation, he stressed the need for structural reforms in the banking sector to ensure stability and good governance, as well as strengthening coordination between the banking and private sectors.

Ahmed said that the public sector credit growth has surged to an unprecedented 26.15 percent. Meanwhile, government borrowing from the banking system reached Tk 73,035 crore during the July-January period, a 673 percent increase compared to the same period last year, indicating that banks are increasingly prioritising risk-free lending.

“This trend has created a severe ‘credit crowding out’ effect, leaving the private sector deprived of adequate access to credit.”

He noted that many businessmen and SMEs are suffering because of a small number of wilful defaulters.

Nawshad Mustafa, director of the SME and Special Programmes Department of Bangladesh Bank, said a key challenge in the financial sector is the shortage of authentic and accurate data, which hampers effective decision-making.

He stressed the need for stronger AI-based connectivity among financial institutions and government agencies to improve data flow and policy formulation.

Abdul Hai Sarker, chairman of Bangladesh Association of Banks (BAB), said there is no alternative to simplifying SME financing, noting that private banks are now increasingly stepping in to fund the sector.

He also pointed to a lack of coordination between policymakers and stakeholders, which he said needs to be addressed.