Bangladesh Plans to Cut Corporate Bank Loans, Shift Focus to Bond Market

Bangladesh is preparing for a major shift in its corporate financing structure as the central bank moves to reduce corporate reliance on bank loans and strengthen the bond market.

Bangladesh Bank Governor Ahsan H. Mansur said large corporate groups will no longer be allowed to exceed single borrower exposure limits set for commercial banks. The move aims to curb rising non-performing loans and encourage corporations to seek long-term financing through bonds.

According to the governor, banks have historically borne excessive risk by providing long-term loans to large corporations, creating a mismatch between assets and liabilities. Redirecting corporate financing to the bond market would ease pressure on the banking sector.

He also noted that reforms are underway to make bond issuance faster, cheaper, and more attractive to investors. Incentives for corporate bond issuance are being considered, while government participation is expected to play a key role in building market confidence.

High inflation and elevated bank lending rates remain major challenges, he said, but with macroeconomic stability, a functional and vibrant bond market could be developed within five to seven years.

The policy shift reflects Bangladesh’s broader goal of transitioning from a bank-dependent economy to a more market-driven financial system.