Written by The Banking Post
A sustained slowdown in deposit growth has intensified liquidity pressures in Bangladesh’s banking system, driven by weak economic momentum, high inflation, and a deepening crisis of depositor confidence.
Bangladesh Bank (BB) data shows total deposits reached Tk 18.32 trillion by May 2025, reflecting a 7.77% year-on-year rise—significantly down from 11.04% growth posted in December 2023. This downward trajectory continued through March (8.51%) and April (8.21%), signaling persistent strain.
Insiders point to the increasing currency circulation outside the formal banking channel, now totaling Tk 2.94 trillion as of May, up from Tk 2.77 trillion in April. This shift is linked to public apprehension stemming from past loan irregularities and a perceived erosion in sector integrity.
While long-term deposits saw marginal improvement, demand deposits have been retreating, largely due to unfavorable rate dynamics. “The worrying trend of deposit outflows is aggravating the liquidity crunch,” said a BB official on condition of anonymity. “Confidence remains fragile, and fresh inflows are sluggish.”
Industry leaders echoed the concern. MTB CEO Syed Mahbubur Rahman cited declining formal employment and stagnant real wages as barriers to savings. “Households are struggling to save beyond daily expenses. It’s a clear reflection of economic stress.”
To meet funding needs, many banks have leaned heavily on BB’s repo facility. Repo-backed borrowing surged to Tk 1.45 trillion in June, compared to Tk 1.33 trillion in May, Tk 940 billion in April, and Tk 838 billion in March—highlighting rising dependence on emergency liquidity support.
Despite these challenges, banks continue deploying funds into government securities amid sagging private investment, raising further questions about long-term liquidity strategy and risk exposure.
