Deposits across Bangladesh’s banking sector continue to expand rapidly, yet corporate investment and industrial borrowing remain severely muted.
Driven by enterprise hesitation toward new factory expansion and heightened risk aversion among commercial lenders, total excess liquidity in the banking system crossed the Tk4.08 trillion ($34+ billion) mark for the first time at the end of June FY26.
According to Bangladesh Bank data, total surplus liquidity surged by Tk71,000 crore in a single month, rising from Tk337,000 crore in May to Tk408,000 crore in June.
This liquidity buildup contrasts sharply with private sector credit growth, which fell to a 33-year low of 4.47% YoY in June—far behind the 10.74% YoY growth in bank deposits.
With commercial risk perception high, banks are channeling excess deposits into safe-haven government Treasury bills and bonds rather than corporate lending.
In an effort to spur borrowing, Bangladesh Bank reduced the policy repo rate by 50 basis points from 10.00% to 9.50% and unveiled a Tk60,000 crore stimulus package (with Tk41,000 crore sourced from surplus bank liquidity).
Enterprise leaders cite erratic gas and electricity supply, elevated borrowing costs, and policy uncertainty as the main reasons for deferring major capital investments.
Banking Sector Asset Allocation Shift (FY 2023–2026)
Bank Deposit Growth (June FY26) ──▶ +10.74% YoY (Surplus Inflow)
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Private Sector Credit Growth ──▶ +4.47% YoY (33-Year Low Demand)
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Surplus Liquidity Holding ──▶ Tk 4.08 Trillion (Redirected to Govt Bills/Bonds)
Liquidity & Credit Indicator | June 2024 Base | May 2026 Level | June 2026 Level | YoY / Periodic Trend | Macroeconomic & Sectoral Impact |
Total Excess Liquidity | Tk283,000cr | Tk337,000cr | Tk408,000cr | +Tk71,000cr in 1 Month | Over-concentration of idle cash in bank vaults & government securities |
Deposit Growth Rate | — | — | 10.74% YoY | Steady Inflow | Depositor confidence returning post-banking sector governance reforms |
Private Credit Growth | — | — | 4.47% YoY | Historical Low | Industrial expansion halted; credit limited to short-term working capital |
Policy Repo Rate | 10.00% | 10.00% | 9.50% | -50 bps Cut | Central bank easing to lower commercial borrowing rates |
Economic Stimulus Package | — | — | Tk60,000cr | New Policy Push | Includes Tk41,000cr fund pooled from surplus commercial liquidity |
The widening gap between bank liquidity and private sector lending highlights distinct headwinds on both the demand and supply sides of credit.
"The surge in excess liquidity does not mean banks are holding uninvested physical cash in their vaults," explained Syed Abu Naser Bakhtiar Ahmed, chairman of Agrani Bank PLC.
"A significant portion of these funds is held in government Treasury bills and bonds. Because commercial lenders face high non-performing loan burdens, they find sovereign paper far more attractive than corporate exposure. However, bank deposits must eventually flow into productive industrial channels, particularly micro, cottage, and small-medium enterprises (CMSMEs)."
"While lowering the central bank policy rate by 50 basis points is a positive signal, interest rate cuts alone will not trigger an industrial investment recovery," noted Md Arfan Ali, former president and CEO of Bank Asia PLC.
"Entrepreneurs hesitate to take on fresh debt when gas and power supplies remain unreliable. Until industrial utilities, logistics costs, and business climate uncertainties are resolved, surplus capital will remain parked in government securities."
Strategic priorities
To convert Tk408,000 crore in surplus liquidity into industrial output and job creation, financial analysts recommend four policy priorities:
- Prioritizing uninterrupted gas and power supply to industrial zones (Gazipur, Narayanganj, Mirsarai) to restore investor confidence.
- De-risking commercial bank lending to small and medium enterprises (CMSMEs) through expanded central bank credit guarantees.
- Ensuring fast-track processing for small-business working capital and industrial reactivation projects.
- Enforcing Single-Borrower Exposure Limits: Encouraging banks to diversify credit away from large corporate groups toward mid-tier manufacturing and export-oriented supplier networks.
While record excess liquidity of Tk408,000 crore demonstrates strong bank deposit recovery, the drop in private credit growth to 4.47% highlights ongoing industrial hesitation.
Transforming this excess liquidity into real economic momentum will require addressing gas and power shortages, easing business operating costs, and rebuilding investor confidence.
