Cash moving back to vaults amid higher rates

The currency held outside banks has been flowing back into vaults in greater volumes in recent months, providing some sort of respite to commercial lenders amid persisting liquidity tightness.
Deposits amounting to Tk 260 billion that flowed out returned to the banking sector in the last four months till October, official data shows.
Central bankers and money market analysts say clients withdrew a large volume of their deposits from the banking system due to trust deficit in the wake of media reports on the merger of several commercial lenders.
The volume of mattress money (cash kept outside banks) rose to a record high in June 2025.
But comparatively higher deposit rates amid a lax investment regime under the prevailing economic sluggishness have prompted many to put their money back in the banking system, according to officials.
The latest central bank data reveals the volume of currency held outside banks dropped to Tk 2.70 trillion at the end of October 2025 from June's count of Tk 2.96 trillion.
Deposit outflow had kept rising since October 2024 (Tk 2.77 trillion), following reports on gross irregularities in some commercial banks.
Seeking anonymity, a Bangladesh Bank (BB) official says people withdrew deposits in large volumes after the media reported on how ballooning non-performing loans (NPLs) had left some banks in fragile health.
But regulatory interventions to salvage the banks and the continuation of the contractionary monetary policy stance by keeping the policy rate as high as 10 per cent helped allure depositors again, he says.
"That is why the volume of mattress money continued to drop in recent months," the official says.
He says deposit growth was recorded at 7.77 per cent in June, which rose to 9.62 per cent by the end of October.
"It also indicates that the deposits that flew out of banks have now taken a reverse course to enter back into vaults," the central banker says.
The August deposit growth was 10.01 per cent, which fell to 9.97 per cent and 9.62 per cent in September and October, respectively, according to the central bank data.
Managing Director and Chief Executive Officer of Pubali Bank Mohammad Ali says the deposit interest rates are still lucrative because of the banking regulator's contractionary policy stance.
The rates range from 7.0 per cent to 10.50 per cent in the banking sector, which are comparatively better amid this lax investment regime under the prevailing economic slowdown, he says.
"This is one of the factors that helps reduce the volume of the currency buildup outside banks," the experienced banker says.
Managing Director of NCC Bank M Shamsul Arefin says there were media reports on the weak fundamentals of some banks, which triggered panic deposit withdrawal in many banks, mostly Shariah-based ones.
Depositors kept the money in their own management. But as they found that there are many good and compliant banks, they started channelling their deposits back into those, he explains.
"This is one of the reasons behind the falling trend in the volume of the currency outside banks," the seasoned banker adds.

jubairfe1980@gmail.com