Written by The Banking Post
After political uncertainty last year drove a surge in currency held outside the banking system, April data from Bangladesh Bank show a sharp reversal. Depositors are redepositing funds, bolstering banks’ liquidity and signalling renewed confidence in the financial sector.
April’s Key Cash and Liquidity Moves
- Cash with the public (outside banks) shrank from Tk 296,431 cr in March to Tk 277,366 cr in April—a decline of Tk 19,064 cr.
- Reserve money (the central bank’s base liquidity) fell by Tk 22,088 cr to Tk 380,645 cr.
- Currency in circulation dipped by Tk 18,476 cr to Tk 302,684 cr.
Analysts attribute the March spike in cash hoarding to fears over banking governance and corruption. April’s outflow back into banks suggests depositors now trust the system enough to park funds safely.
Historical Context: From Hoarding to Redeployment
Following the government change in August 2023, public cash holdings climbed steadily, peaking in March 2025. As political and sector stability restored, that trend reversed, marking the first sustained redeposit cycle in months.
Banking Sector Benefits and Broader Impact
Economists highlight several positive outcomes:
- Stronger Bank Liquidity: Increased deposits improve banks’ capacity to extend credit.
- Lower Funding Costs: Ample liquidity can drive down lending rates.
- Investment-Friendly Climate: Easier access to finance supports business expansion.
“Redeployed cash fuels healthy credit growth and underpins economic momentum,” notes a senior market strategist.
Outlook for Financial Stability
With depositors’ faith returning, banks can lend more at competitive rates, smoothing money-market operations. Policymakers anticipate that this renewed trust will translate into robust capital formation—laying a foundation for sustained economic growth.
