Bangladesh Bank maintains policy rate at 10%

Bangladesh Bank has kept the policy rate unchanged at 10% in its monetary policy for the second half of FY26, maintaining a tight monetary stance amid ongoing macroeconomic stabilisation.

The central bank also reduced the Standing Deposit Facility (SDF) rate to 7.5% from 8% to encourage banks to invest in the money market rather than park funds with the central bank.

Governor Ahsan H Mansur unveiled the policy at a press conference on Monday (February 9) at the Bangladesh Bank headquarters, describing the economy as being at a “critical transition point” from a potential crisis toward macroeconomic stability and renewed growth.

Although inflationary pressures are easing, they remain elevated and uneven, prompting the central bank to caution against any premature reduction in the policy rate.

The governor also cited excessive government borrowing, driven by low revenue and high expenditure, as a key factor putting upward pressure on interest rates and crowding out private-sector credit.

The monetary policy statement noted that private-sector credit growth remains historically low due to tight liquidity conditions, elevated public-sector borrowing, and weak investor confidence, despite exchange-rate stability. Liquidity stress, largely driven by capital flight amid banking sector irregularities in 2024, has eased, with deposit growth recovering from below 7% in August 2024 to around 11% by December 2025.

Non-performing loans (NPLs) stood at over 36% as of September 2025, reflecting stricter asset classification and improved governance rather than sudden deterioration in asset quality. Banks are prioritising balance-sheet repair over aggressive credit expansion.

On the external front, foreign exchange reserves rose from $25.6 billion in August 2024 to $33.2 billion in December 2025, supported by strong remittance inflows, moderate imports, and the resumption of regular foreign debt servicing.

Globally, economic growth is projected to moderate to 3.1% in 2026, with easing inflation, while domestic inflation remains above the central bank’s 7% target, driven largely by supply-side constraints and structural bottlenecks.

The objectives of the current Monetary Policy Statement are to anchor inflation expectations, bring inflation toward target levels, address elevated NPLs, and restore public confidence in the banking system through improved governance and coordination with fiscal authorities.