A reverse trend has emerged in the flow of cash held at home. Within a one-month span in June, cash held by the public decreased by nearly Tk13,000 crore.
During the same period, bank deposits grew by over Tk38,000 crore.
These two statistics from Bangladesh Bank point toward a shift in the movement of money—a portion of the funds previously held outside the banking system is returning to banks.
According to data from the central bank, the amount of cash held by the public stood at Tk336,375 crore in June of this year, down from Tk349,374 crore in May.
This indicates that cash outside banks dropped by Tk12,999 crore, or 3.72%, in just one month.
However, compared to June of last year, cash held by the public remains 13.47% higher.
In June of last year, the amount was Tk296,451 crore. In May, cash outside banks had jumped by nearly Tk50,000 crore in a single month.
Md Ezazul Islam, director general of the Bangladesh Institute of Bank Management (BIBM), stated that one of the main reasons for the surge in cash outside banks in May was Eid-ul-Azha and instability surrounding Islami Bank.
Although the figure decreased in June, he noted it was not significant enough and needed to decline further. However, he expects cash outside banks to drop more in the future.
Economists and bankers attribute this change to rising deposit interest rates, initiatives to restore confidence in the banking sector, and the financial advantages of keeping money in banks rather than at home.
With higher interest rates, term deposits and various savings instruments are offering attractive returns. Furthermore, holding large amounts of cash at home carries risks related to theft, loss, and transaction security.
In June, total deposits across banks reached approximately Tk20,79,296 crore, up from Tk20,41,099 crore in May.
In a single month, deposits grew by Tk38,197 crore, or 1.87%. Year-on-year, deposits increased by Tk201,732 crore, representing a growth of 10.74%.
Restoring trust and future outlook
Steps are also being taken to rebuild trust in the banking sector.
Finance Minister Amir Khosru Mahmud Chowdhury informed Parliament that depositors of five troubled banks will receive their money back with interest, and the "haircut" method will be scrapped.
Additionally, under the new Deposit Protection Act, provisions have been made to quickly return funds up to a specified limit to eligible depositors in the event of a bank liquidation.
Mustafa K Mujeri, former chief economist of Bangladesh Bank, remarked that these initiatives could positively influence perceptions regarding the safety of the banking system.
However, he cautioned that an increase in deposits does not mean all problems in the banking sector are resolved.
According to bankers, competition to mobilize deposits has intensified following the withdrawal of interest rate caps.
Driven by attractive rates, a portion of the unbanked cash is being converted into deposits.
However, not all of the total deposit growth can be attributed solely to cash returning from households—new savings, accrued interest, and business transactions also play a significant role.
Ultimately, while the declining trend of cash outside banks is a positive sign, its sustainability will depend on ensuring trust, good governance, and deposit security across the banking sector.
