Currency Held Outside Banks Declines as Deposits Flow Back

In recent months, substantial volumes of currency held outside banks have been returning to bank vaults, providing some relief to commercial banks amid persistent liquidity constraints. Central bank data indicate that approximately 260 billion taka flowed back into the banking system over the four months leading to October.

Analysts and central bank officials explain that large-scale withdrawals occurred previously due to diminished trust following media reports on the merger of several commercial banks. The volume of cash outside banks reached a record high in June 2025.

Relatively high deposit interest rates combined with the prevailing lax investment environment have encouraged depositors to reinvest funds in the banking system. According to the central bank, the volume of currency outside banks fell from 2.96 trillion taka in June to 2.70 trillion taka by October.

A central bank official, speaking anonymously, said that panic withdrawals were triggered by reports of fragile financial conditions and rising non-performing loans in some banks. Regulatory interventions and a stable policy rate of 10 per cent attracted depositors back to the banking system.

Deposit growth rose from 7.77 per cent in June to 9.62 per cent by October. Mohammad Ali, Managing Director of Pubali Bank, noted that deposit interest rates remain attractive, while NCC Bank’s Managing Director M. Shamsul Arefin added that depositors are now placing funds in well-managed and Shariah-compliant banks.

AJ