Leading commercial banks in Bangladesh continue to park their excess funds in the low-interest Standing Deposit Facility (SDF), despite comparatively higher returns available in the interbank lending market. Analysts suggest that the prevailing trend is driven by a combination of reduced short-term funding demand and cautious attitudes towards riskier, longer-term investments.
Market experts note that banks are increasingly able to meet their short-term liquidity needs through alternative channels, including foreign currency sales and internal liquidity management tools, thereby reducing reliance on interbank loans. Meanwhile, the gradual decline in government securities yields has diminished the earlier advantages of short-term government investments.
Long-term investment caution is also a significant factor. From February, Primary Dealer (PD) guidelines will restrict participation in Treasury bill and bond auctions exclusively to PD banks. Commercial banks with counterparty limitations, particularly the larger institutions, are therefore prioritising SDF deposits over longer-term government instruments.
On 15 July 2025, Bangladesh Bank reduced the SDF interest rate by 50 basis points to 8.0%, aiming to stimulate activity in the call money market. Nevertheless, due to weak demand for industrial and business loans, banks continue to regard the SDF as a secure and convenient investment option.
According to Bangladesh Bank statistics, monthly SDF contributions from major banks have fluctuated as follows:
| Month | SDF Deposits (BDT Billion) |
|---|---|
| July 2025 | 261.47 |
| August 2025 | 267.65 |
| September 2025 | 365.32 |
| October 2025 | 669.55 |
| November 2025 | 404.00 |
| December 2025 | 424.00 |
A senior central bank official, speaking on condition of anonymity, stated that short-term loan demand in the call money market has recently declined, pushing the weighted average interest rate (WAIR) down from above 10% to 9.77%. The official added that Bangladesh Bank interventions, such as foreign currency purchases and sales, have helped ease liquidity pressures.
While SDF participation is predominantly by foreign banks, several state-owned banks have begun utilising the facility. For instance, Standard Chartered Bank reportedly deposits over BDT 10 billion daily into the SDF due to counterparty limitations in the call market.
A senior banking official observed that, in the past, banks favoured high-yield government securities and were active in call money trading. With interest rates declining, previous short-term advantages have diminished, prompting banks to focus more on secure, short-term investments. The upcoming Primary Dealer regulations are expected to reinforce this cautious strategy in the foreseeable future.