Proposal to Suspend 500 and 1000 Taka Notes

A proposal to temporarily withdraw 500 and 1000 taka banknotes from circulation has been placed in Bangladesh’s parliament as part of a wider argument aimed at bringing large volumes of cash back into the formal banking system.

Speaking during the general discussion on the proposed national budget for the 2026–27 financial year on Sunday, BNP Member of Parliament A M Mahbub Uddin Khokon suggested that suspending the two high-denomination notes could encourage individuals holding large amounts of cash outside banks to deposit their money within a limited timeframe.

He argued that growing mistrust in the banking sector has led many citizens to keep savings at home rather than in financial institutions. According to him, concerns over financial stability, alongside past instances of capital flight and alleged corruption, have contributed to a significant amount of money circulating outside formal channels.

Under his proposal, the government would withdraw the 500 and 1000 taka notes temporarily and allow a two-month window for holders to deposit them into banks. During this period, individuals without declared tax records for such funds would be permitted to regularise their money by paying a 25 per cent tax. He claimed this mechanism could reduce the budget deficit, improve liquidity in the banking system and strengthen financial institutions by increasing available deposits for investment.

Khokon also questioned the scale of the country’s banking sector, suggesting that the number of banks operating in Bangladesh may be excessive. He expressed concern that financial institutions have become vulnerable due to mismanagement and alleged misuse of funds, calling for consolidation to better safeguard public deposits.

He further argued that political influence in the financial sector has encouraged unhealthy practices, including the establishment of financial institutions for personal or partisan advantage. This, he said, places additional strain on public confidence and increases the burden on state-backed support when banks face shortfalls.

Turning to broader economic concerns, the MP highlighted money laundering as a persistent national challenge. He stated that despite repeated discussions since independence about recovering illicitly transferred funds from abroad, little tangible progress has been achieved. Once capital enters the international financial system, he noted, its repatriation becomes extremely difficult.

Khokon emphasised the importance of building a domestic economic environment that encourages investment within the country rather than capital flight. He pointed to countries such as Singapore, Dubai, Canada and Thailand as examples where investor confidence is supported by stable financial systems and predictable governance frameworks.

He also identified unemployment and law and order as key challenges for the incoming fiscal framework, warning that economic recovery would be difficult without creating meaningful job opportunities for the country’s large youth population. According to him, sustainable improvements in security and social stability are closely linked to employment generation.

While acknowledging that the proposed budget carries a deficit, he noted that deficit financing is common internationally and has been a regular feature in Bangladesh’s own fiscal history. He added that the budget has been prepared within a short timeframe under challenging economic conditions, describing it as part of efforts to stabilise an economy he characterised as previously weakened.