Amid persistent inflation, Eid-ul-Fitr-related spending, and a partial return of confidence in the banking sector, the Bangladeshi economy moved in two opposite directions in March. On one hand, banks recorded the highest deposit growth in nine months; on the other, nearly Tk 250 billion in cash flowed out of the banking system. This sudden outflow has raised questions about the destination of the money and has become a concern for policymakers. Economists say such a large cash withdrawal from the formal banking channel within just one month is unusual and indicates informal transactions, tax evasion, and a lack of trust in the financial system.
According to updated data from Bangladesh Bank, deposits in banks grew by 8.51% in March, a significant increase compared to the same period last year. While this reflects a positive message for the macroeconomy, economists are also alarmed by another trend—the cash in circulation outside banks increased by Tk 249.35 billion in just one month.
Restoring Confidence in Banks
At the end of March 2024, total bank deposits stood at Tk 18.18 trillion, compared to Tk 16.75 trillion in the same period last year. This marks the highest monthly growth since June 2023. Experts attribute the growth to increased interest rates, central bank oversight, and a surge in remittances, which helped restore some depositor confidence.
Mohammad Ali, Managing Director of Pubali Bank, stated, “Higher interest rates, special efforts by banks to attract deposits, regulatory reforms by the central bank, and record-high remittance inflows in March—these four factors contributed to the rise in deposits.”
Cash Surge Signals Concern
In March alone, the amount of cash circulating outside banks rose sharply to Tk 2.96 trillion, up from Tk 2.71 trillion in February. This reflects a 9.18% increase within a single month. On a yearly basis, the growth rate is 13.49%.
Economists believe this trend signals tax evasion, informal sector transactions, and weakening confidence in the financial sector. A large volume of money outside the banking system can shrink the formal economy and negatively affect investment and production.
Eid-Driven Spending Impact
Experts also point to the influence of Eid-related expenditures. During Ramadan and Eid, people tend to hold more cash for shopping and preparations. Mohammad Ali commented, “Ahead of Eid, it is common for people to keep more cash for essential purchases.”
A Message for Policymakers
Analysts suggest that maintaining economic balance requires ensuring transparency and good governance in the banking sector, promoting digital transactions, and implementing policies to discourage excessive cash use. At the same time, competitive interest rates and improved customer service are essential to retain depositors.
They warn that increasing reliance on cash reduces the scope of digital payments and the number of taxpayers, posing a serious obstacle to government revenue collection and long-term economic growth.
