Written by The Banking Post
Commercial banks’ reliance on the Bangladesh Bank’s (BB) repo facility surged to an all-time high in July 2025, exposing a deepening liquidity crunch in the financial sector.
According to BB data, scheduled banks borrowed Tk 1.55 trillion in July alone — the highest ever for a single month. Of this, 72% (Tk 1.11 trillion) came through the 14-day repo, while Tk 360 billion and Tk 74.37 billion were availed under 7-day and overnight repos, respectively.
The borrowing volume has been rising steadily: Tk 1.45 trillion in June, Tk 1.33 trillion in May, Tk 940 billion in April, and Tk 838 billion in March.
Bankers and analysts say the repo dependence reflects stagnant deposit growth, worsening non-performing loans (NPLs), and growing mistrust in the banking system after recent loan scandals.
BB officials privately admit that many banks are also exploiting the facility by borrowing short-term repo funds and investing in long-term government securities for profit, instead of addressing liquidity gaps. This arbitrage has contributed to falling yields on treasury bills and bonds.
“Deposit growth stood at just 7.77% in June, compared with over 12% three years ago,” said a senior BB official. “Meanwhile, NPLs have climbed to Tk 4.20 trillion, nearly one-fourth of total outstanding loans worth Tk 17.42 trillion.”
A commercial bank treasury head said banks are now borrowing far beyond their cash reserve ratio (CRR) needs. “The CRR requirement is about Tk 800 billion, but banks borrowed Tk 1.55 trillion in July. Without the repo facility, many banks would collapse within weeks,” he warned.
The IMF’s lending conditions have already pushed BB to tighten the facility, cutting repo auctions to once a week, scrapping the 28-day repo, and preparing to withdraw the 14-day option in coming months.
Economist Dr. M Masrur Reaz, chairman of Policy Exchange Bangladesh, said banks are profiting from an “arbitrage opportunity” by borrowing at a 10% repo rate and investing in government securities yielding higher returns.
“To restore stability, BB should review treasury yields and strengthen measures to rebuild depositor confidence, while nudging banks to channel funds into productive sectors,” he suggested.
