The amount of cash held outside the country鈥檚 banks increased for the fourth consecutive month in March as depositors were highly concerned over bank merger moves.
According to Bangladesh Bank data, the volume of the currency outside bank reached Tk聽2,61,195 crore in March, increasing from Tk聽2,57,574 crore in February.
This marked a rise from Tk聽2,57,295 crore in January 2024, Tk聽2,54,860 crore in December 2023, Tk聽2,48,441 crore in November 2023 and Tk聽2,45,943 crore in October 2023.
Bankers said that many depositors were withdrawing funds due to concerns about the safety of their deposits in the wake of the mergers.
The issue of bank mergers came to the fore after Bangladesh Bank governor Abdur Rauf Talukder at a meeting with the Bangladesh Association of Banks on March 4 urged bank owners to decide on merger partners.
He warned them of forced mergers under the prompt corrective action framework issued on December 5, 2023.
On March 12, BB executive director and spokesperson Mezbaul Haque said that the regulator was planning to merge 10 banks within a year.
Bankers said that these events contributed to public anxiety about the safety of their savings in banks, despite assurances from BB officials that deposits would remain safe.
Under pressure, the central bank on April 16 declared that it would not accept any more merger proposal after receiving some pleas.
Another contributing factor to the rise in cash outside banks is the erosion of trust in the country鈥檚 banking sector due to loan irregularities and scandals in several banks, bankers said.
When cash is held outside banks, it reduces the effectiveness of the central bank鈥檚 efforts to control money supply, which is crucial to managing inflation and economic stability, they said.
They said that high inflation was also a reason for the rising cash outside banks.
Bangladesh鈥檚 overall inflation rate reached 9.81 per cent in February, remaining over 9 per cent since March 2023.
These inflationary pressures have eroded the purchasing power of the currency, prompting depositors to withdraw their funds to hedge against the rising costs of living, bankers said.
Bankers said that the country鈥檚 economy has been struggling for a range of adverse factors, including global supply chain disruptions, a hike in raw material prices, currency devaluation and a local commodity price spiral, following the Russia-Ukraine war that began in March 2022.
Besides, a significant portion of economic activity occurs in the informal sector in the country and people prefer to use cash for transactions to avoid taxes or regulatory scrutiny, they said.
