Deposits Return as Cash Held Outside Banks Declines

In recent months, currency held outside banks has been flowing back into bank vaults in substantial volumes, providing some relief to commercial lenders amid ongoing liquidity tightness. Official data shows that deposits amounting to 260 billion taka returned to the banking sector over the four months until October.

Central bankers and money market analysts attribute the earlier withdrawal of large deposits to a trust deficit following media reports on the merger of several commercial banks.

The volume of cash outside banks had reached a record high in June 2025. However, comparatively higher deposit rates under a lax investment environment have encouraged many depositors to return their money to the banking system.

Latest central bank figures show that currency held outside banks fell from 2.96 trillion taka in June to 2.70 trillion taka at the end of October. Deposit outflows had been rising since October 2024 following reports of significant irregularities in some banks.

A central bank official, speaking on condition of anonymity, said people had withdrawn deposits after media reports highlighted ballooning non-performing loans that left some banks in fragile condition. Regulatory interventions and the continuation of a contractionary policy stance with a policy rate of 10 per cent encouraged depositors to return their funds.

Deposit growth rose from 7.77 per cent in June to 9.62 per cent by October. August saw 10.01 per cent growth, which fell to 9.97 per cent in September and 9.62 per cent in October.

Mohammad Ali, Managing Director of Pubali Bank, stated that deposit rates remain attractive due to the banking regulator’s policy stance. NCC Bank’s Managing Director M. Shamsul Arefin added that deposits were initially withdrawn due to fears about weak fundamentals of some banks, but once depositors recognised well-managed and Shariah-compliant banks, funds were directed back into the system.

KhaborwalaAJ