Cash transactions have increased outside banks ahead of the national election.

In Bangladesh, cash held outside the formal banking system soared sharply in January, as public unease with banks deepened and withdrawals spiked ahead of the national election scheduled for 12 February.

According to data from Bangladesh Bank, the currency circulating outside banks rose by Tk 40,982 crore in just two months, climbing to Tk 3,10,000 crore at the end of January from Tk 2,69,018 crore in November 2025.

Bankers noted that election-related expenditures were a major driver of the surge. As campaigning intensified across the country, candidates increasingly relied on cash to finance rallies, advertisements, and other on-ground activities, fuelling record withdrawals. Such patterns are common during national polls, when liquidity in the economy tends to move from bank deposits into physical cash.

Concerns about the safety of deposits further amplified the trend. Deposit holders, wary of ongoing mergers, weak balance sheets, and uncertainty surrounding some lenders, withdrew funds in large volumes. In recent months, Bangladesh Bank approved the merger of five shariah-based banks facing financial stress and has been reviewing the asset quality of another 11 institutions as part of a wider sector clean-up.

Panic intensified after the central bank capped profit rates on all types of deposits at the merged banks at 4 per cent, prompting depositors to move their funds to safer avenues. Prior to this surge, cash outside banks had been gradually declining, reflecting a period of easing liquidity pressures. From July to November 2025, currency outside banks fell steadily from Tk 2,87,294 crore to Tk 2,69,018 crore.

In response to rising cash movements, the Bangladesh Financial Intelligence Unit issued an advisory on 11 January, requiring banks and financial institutions to report any daily deposit or withdrawal of Tk 10 lakh or more, including over-the-counter, ATM, and cash-linked online transactions. Bangladesh Bank has also proposed temporary restrictions on digital payments during the election period. Mobile financial services such as bKash, Rocket, and Nagad could face daily transaction caps of Tk 10,000, while person-to-person internet banking transfers may be suspended from 8–13 February.

Underlying these developments are long-term challenges in the banking sector. Non-performing loans surged to Tk 6.44 lakh crore in September 2025 from Tk 4.20 lakh crore in March, revealing structural weaknesses, while rising inflation—recorded at 8.49 per cent in December compared with 8.29 per cent in November—has further incentivised people to hold physical cash amid high living costs.

The convergence of election-related cash demand, banking sector uncertainty, and inflationary pressures has thus contributed to one of the steepest rises in currency outside banks in recent years.