Cash Held Outside Banks Declines as Deposits Return

In recent months, currency held outside banks has been returning to bank vaults in significant volumes, offering some relief to commercial banks facing persistent liquidity constraints. Central bank data shows that approximately 260 billion taka flowed back into the banking sector over the four months leading up to October.

Central bankers and money market analysts noted that large-scale deposit withdrawals had occurred previously due to diminished trust following media coverage on the merger of several commercial banks. The volume of cash outside banks reached a record high in June 2025.

However, relatively high deposit interest rates amid a subdued investment environment have encouraged depositors to return funds to the banking system. Central bank data indicate that the volume of cash outside banks fell from 2.96 trillion taka in June to 2.70 trillion taka by the end of October.

A central bank official, requesting anonymity, explained that depositors had initially withdrawn money due to reports of some banks’ fragile financial conditions. Regulatory interventions and the maintenance of a policy rate at 10 per cent encouraged depositors to reinvest their funds.

Deposit growth rose from 7.77 per cent in June to 9.62 per cent in October. Mohammad Ali, Managing Director of Pubali Bank, highlighted that deposit rates remain attractive due to the regulatory stance. NCC Bank’s Managing Director M. Shamsul Arefin added that depositors initially panicked but have now redirected funds to well-managed and Shariah-compliant banks.

AJ