Excess liquidity in the banking sector jumped to Tk 3.06 lakh crore in August 2025, a 75 per cent rise from a year earlier, reflecting how banks have pulled back from lending amid rising defaults, weak investment demand and deep economic uncertainty.
Bangladesh Bank data shows surplus liquidity climbed to Tk 3,06,111 crore in August, up from Tk 1,75,337 crore in the same month of 2024.
Of the total amount, state-run banks held Tk 1 lakh crore, private commercial banks Tk 1.73 lakh crore and foreign banks Tk 32,117 crore of idle money in August
The buildup has been steady through the past year, rising from Tk 2,15,002 crore in December 2024 and Tk 2,92,745 crore in
June 2025.
The surge indicates that banks are holding funds instead of lending, a trend fuelled by a rapid rise in non-performing loans.
Bankers said that lenders are reluctant to deploy fresh credit because they fear more loans will turn bad.
Private sector credit growth dropped to 6.29 per cent in September 2025, the lowest on record, while overall credit growth to both public and private sectors slowed to 8.8 per cent.
Bangladesh Bank鈥檚 monetary policy statement for July鈥揇ecember 2025 noted several reasons behind the slowdown such as weaker loan demand from non-bank institutions, higher borrowing costs due to contractionary policy, and earlier liquidity tightness inside banks.
Business confidence has also not recovered fully, which means firms are borrowing less for expansion or new investments.
Bank executives told local newspapers that the growing pile of idle funds reflects a stagnant economy.
When banks hesitate to lend, businesses struggle to secure working capital, slowing production, job creation and investment.
The core issue behind this caution is the size of defaulted loans.
Non-performing loans almost doubled within a year, reaching Tk 6 lakh crore in June 2025 from Tk 1.82 lakh crore in March 2024.
Defaults now make up around 30 per cent of total loans, the highest ratio in South Asia.
Because of this, almost 20 banks have virtually stopped lending, while many others lend only after strict scrutiny.
The crisis has pushed Bangladesh Bank to initiate forced mergers among five Shariah-based banks that collapsed and to review the asset quality of 11 more banks, raising expectations of further consolidation.
With lending opportunities shrinking, more than 70 per cent of excess liquidity is now being parked in government treasury bills and bonds.
Banks see these as safer options in the current environment.
During July and August 2024, when widespread unrest and the fall of the Awami League government shook confidence, excess liquidity fell to Tk 1,75,337 crore as depositors withdrew large amounts. Since then, deposits have gradually recovered.
Total deposits in the banking system rose to Tk 18.80 lakh crore in July 2025, compared with Tk 17.34 lakh crore a year earlier, contributing to the current buildup of idle funds.
