Increase in Cash Outside Banks Ahead of National Elections

Ahead of Bangladesh’s national elections scheduled for 12 February, cash held outside the formal banking system has surged dramatically, reflecting mounting public anxiety over banks and heightened election-related spending. According to Bangladesh Bank data, currency outside banks jumped by Tk 40,982 crore between November 2025 and January 2026, reaching Tk 3,10,000 crore at the end of January from Tk 2,69,018 crore in November.

Bankers attribute this spike primarily to election-related expenditures, as candidates increasingly rely on cash for campaign activities. Historically, similar patterns emerge before national elections, with cash transactions rising sharply across the economy. Concerns over bank mergers, weak balance sheets, and the safety of deposits have further amplified withdrawals.

Bangladesh Bank has approved the merger of five crisis-hit Shariah-based banks and is reviewing the asset quality of another eleven lenders to strengthen sectoral stability. Panic among depositors intensified when the central bank capped profit rates on all types of deposits at the merged banks at 4 per cent.

The recent surge contrasts with a period of easing pressure in the latter half of 2025. Cash outside banks had declined steadily from July to November, signalling improving liquidity conditions and partial recovery of public confidence.

To enhance oversight, the Bangladesh Financial Intelligence Unit directed banks and financial institutions on 11 January to report any cash deposit or withdrawal of Tk 10 lakh or more per day, covering over-the-counter services, ATM withdrawals, and cash-linked digital transactions. Additionally, temporary restrictions on digital financial services are planned during the election period. Mobile financial platforms such as bKash, Rocket, and Nagad may face daily transaction limits of Tk 10,000, with a cap of Tk 1,000 per transaction, while person-to-person internet banking transfers could be suspended from 8 to 13 February.

Distrust in the banking sector has intensified following the central bank’s disclosure of true financial conditions, revealing non-performing loans had surged to Tk 6.44 lakh crore in September 2025 from Tk 4.20 lakh crore in March. Rising living costs have also contributed to the shift toward cash, with the Bangladesh Bureau of Statistics reporting overall inflation at 8.49 per cent in December, up from 8.29 per cent in November.

The combination of political uncertainty, banking sector fragility, and high inflation underscores the public’s preference for liquidity in the lead-up to one of the most closely watched elections in recent years.