Currency buildups outside banks are flowing back into bank vaults amid a lax investment regime and also trust rebuilding in the banking system, improving liquidity crunch, officials and bankers say.
Rise in deposit rates and persisting lawlessness across the country also seen as two other accelerators.
As such, they say, the individuals who earlier took away their deposits because of multiple factors -- trust deficit following reports of massive loan-related irregularities being a major one -- are getting back to the banking service to keep their hard-earned money.
"As a matter of fact, the reverse course of out-of-bank currency, euphemistically called 'mattress money', helps buildup excess liquidity in the banking industry," says one banker.
Data available with the central bank reveal that the volume of currency outside banks stood at Tk 2.90 trillion at the end of June 2024, increased by Tk 350 billion from December's count in 2023 of Tk 2.55 trillion.
Afterwards, the deposit outflows from banks kept rising remarkably to reach Tk 2.92 trillion in August as reports of gross irregularities in several commercial banks came to light after the country witnessed a mass uprising that toppled the Sheikh Hasina government.
Since then, the volume of mattress money riding on various regulatory interventions kept falling to reach Tk 2.84 trillion, Tk 2.78 trillion, Tk 2.77 trillion and Tk 2.76 trillion in September, October, November and December respectively.
Seeking anonymity, an official at Bangladesh Bank (BB) said the central bank took various measures like increasing interest rates thrice and cash feeding to the liquidity crisis-ridden commercial banks to prevent panic deposit withdrawal.
Such interventions help bring back confidence of the depositors in the banking system, which has been reflected in the gradual fall in the volume of mattress money, the official said.
"Look at the recent statistics--it's very much encouraging for our banking sector as the volume of currency outside banks had dropped by over Tk 140 billion in the last six months until December'24," the central banker told the FE writer.
Managing Director and Chief Executive Officer of Pubali Bank PLC Mohammad Ali says the deposit rates in most banks increased sharply in recent months until December last, which helps attract depositors back to the banks again.
"The gradual drop in the volume of mattress money builds up excess liquidity in banks as the investment avenues under the current macroeconomic situation keeps shrinking," he said.
Apart from rate hike, managing director and CEO of Mutual Trust Bank (MTB) Syed Mahbubur Rahman sees deterioration in the law-and-order situation across the country after the July-August mass uprising as another factor.
"Such insecurity," he says, "probably prompts people to keep their money in secure options like banks. This could be another reason behind the fall in mattress money."
As the investment scope continues shrinking amid persisting economic sluggishness and continuous drop in the yield on government securities, the volume of excess liquidity in the banks is on an upturn.
According to the BB data, excess liquidity in banks amounting to Tk 1.74 trillion was recorded in June 2024 and it soared to around Tk 2.15 trillion in December 2024.
jubairfe1980gmail.com
© 2025 - All Rights with The Financial Express
