Cash held outside the banking system in Bangladesh climbed further in June, highlighting deepening public distrust in banks.
Bangladesh Bank data show that currency outside banks rose to Tk聽2,96,451 crore in June, up from Tk聽2,93,778 crore in May and Tk 2,77,366 crore in April.
Depositors have increasingly withdrawn money amid concerns over bank mergers and worsening financial sector health, bankers said.
The central bank has so far approved the merger of five shariah-based banks and is reviewing the asset quality of another 11 institutions, they said.
The moves triggered fresh panic among depositors, leading to heavy withdrawals. Many of the affected banks failed to meet withdrawal requests on time, further eroding confidence, they added.
Depositors failed to identify good banks to keep their deposits safely, bankers said.
Distrust has deepened as corruption cases and loan scams surfaced after Bangladesh Bank began publishing the real financial conditions of banks, following the fall of the Awami League government.
The scale of non-performing loans illustrates the crisis. Defaults nearly doubled in a year, rising to Tk聽4.20 lakh crore in March 2025 from Tk 1.82 lakh crore a year earlier.
High-net-worth individuals, alarmed by the risks, have shifted funds to government treasury bills and bonds, which currently offer higher and safer returns.
Inflationary pressure has also kept households reliant on cash. Although inflation eased to 8.5 per cent in July鈥攆alling below 9 per cent for the first time in over two years鈥攍iving costs remain high, forcing many to keep cash at hand for daily spending rather than leaving money in banks.
Despite the growing pool of cash outside banks, deposit growth has remained sluggish. Excluding interbank and government accounts, total deposits grew only 7.77 per cent year-on-year in June, reaching Tk 18,77,564 crore compared with Tk 17,42,224 crore a year earlier.
This growth is well below average deposit rates offered by banks through much of the past year.
Seasonal factors have also contributed. Currency outside banks often spikes during Eid celebrations, as seen in June during Eid-ul-Azha and in March during Eid-ul-Fitr.
For example, withdrawals around Eid-ul-Fitr pushed currency in circulation to Tk 2,96,431 crore, one of the highest levels in recent months.
However, economists warn that this seasonal effect is now compounded by structural weaknesses in the banking system. Rising volumes of cash outside banks undermine monetary policy, limit funds available for business lending, and slow financial inclusion.
More troublingly, it risks fueling informal and undocumented economic activity, complicating tax collection and reducing overall transparency in the economy.
