Cash Outside Banks Surges Past Tk380,000 Crore

Cash held outside Bangladesh’s banking system has risen to a record level of more than Tk380,000 crore, despite the rapid expansion of digital payment services and mobile financial transactions. The sharp increase is raising concerns among economists and banking professionals about public confidence in banks, inflationary pressures and the continued strength of the informal economy.

According to Bangladesh Bank data, cash outside banks stood at Tk349,374 crore at the end of May. It subsequently climbed above Tk370,000 crore in June and exceeded Tk380,000 crore in July. The latest figure represents a substantial increase from Tk296,451 crore recorded in June last year.

The longer-term trend is equally striking. Cash outside banks amounted to Tk58,417 crore in 2011. By June 2021, the figure had risen to Tk209,517 crore, reaching Tk236,448 crore in June 2022 and Tk291,913 crore a year later. Although the pace of growth moderated during 2024 and 2025, the latest surge has pushed cash holdings outside banks to an unprecedented level.

Banking sector instability appears to have played a role. Bangladesh Bank officials said uncertainty surrounding Islami Bank during June prompted some customers to withdraw deposits. Around Tk25,000 crore reportedly left the bank, while the central bank provided about Tk13,000 crore in liquidity support to help manage the situation.

Mohammad Zahir Hossain, administrator of Islami Bank Bangladesh and an executive director of Bangladesh Bank, said normal banking operations had resumed and that customers who withdrew money during the period of anxiety were returning deposits.

The rise in cash outside banks has occurred alongside strong deposit growth. During the first 11 months of the 2025-26 financial year, from July to May, deposits in the banking sector increased by Tk163,522 crore, compared with Tk89,774 crore during the corresponding period a year earlier. By the end of May, total deposits stood at Tk2,041,692 crore, representing annual growth of 11.41 per cent.

Economists say the apparently contradictory trends—rising bank deposits and increasing cash outside banks—deserve closer examination. High inflation means consumers need more cash to purchase the same quantity of goods and services. At the same time, extensive informal economic activity, limited financial inclusion and concerns about the safety of deposits can encourage people and businesses to hold physical cash.

Masrur Arefin, managing director and chief executive of City Bank, said rising prices had increased the amount of money circulating through retail markets. He also argued that digital payment infrastructure remained inadequate compared with the enormous number of shops and small businesses across the country.

Digital transactions have expanded considerably in recent years. Monthly transactions through mobile financial services are now worth around Tk250,000 crore, while banking applications and internet banking also account for transactions of roughly the same scale. Bangladesh Bank has promoted Bangla QR alongside systems such as RTGS, NPSB and mobile financial services.

Yet the expansion of digital payments has not translated into a corresponding decline in physical cash holdings. Bangladesh Bank executive director and spokesman Arif Hossain Khan said the continued rise in cash outside banks was a matter of concern and raised the question of whether public confidence in the banking system was weakening.

He also pointed to sustained inflation since 2022 and the liquidity support extended to weaker banks over recent years. A significant portion of that liquidity was subsequently withdrawn by depositors, contributing to the movement of money outside the formal banking system.

Economists argue that the latest figures warrant closer scrutiny of cash-based transactions, the informal economy and the sources of money circulating outside banks. Restoring confidence in financial institutions, improving access to reliable digital payment services and reducing dependence on cash will be crucial if the trend is to be reversed.