The amount of cash held outside the country鈥檚 banks increased for the fifth consecutive month in April amid low confidence of depositors in the banking sector and inflationary pressures.
According to Bangladesh Bank data, the volume of the currency outside bank reached Tk聽2,64,349 crore in April, increasing from Tk聽2,61,195 crore in March and Tk聽2,57,574 crore in February.
This marked a rise from Tk聽2,57,295 crore in January, 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 attributed the increase in withdrawals to depositor concerns about the safety of their funds amid ongoing mergers and widespread irregularities.
They said that high inflation was also responsible for the withdrawals.
The issue of bank mergers gained prominence after Bangladesh Bank governor Abdur Rouf Talukder at a meeting with the Bangladesh Association of Banks on March 4 urged bank owners to decide on merger partners.
He warned of forced mergers under the prompt corrective action framework issued on December 5, 2023.
Despite assurances from Bangladesh Bank officials that deposits would remain safe, public anxiety persisted.
Under pressure, the central bank declared on April 16 that it would not accept any more merger proposals after receiving several pleas.
Trust in the banking sector has also been eroded by loan irregularities and scandals in several banks, bankers said.
Additionally, rising living costs have led people to keep more money in hand, they said.
According to Bangladesh Bureau of Statistics data, the overall inflation rose to 9.89 per cent in May, the highest since October 2023 when it hit 9.93 per cent.
Inflation has remained near 10 per cent since March 2023.
The persistent 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.
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.
