Special Correspondent :
Currency outside the banking system rose sharply in 10 months of the current calendar year sounding alarms for the economists, some of whom fear money laundering and expansion of black economy in an election year.
The amount of coins and notes kept outside banks rose by 14 per cent or Tk 13,34,439 crore until May of the current calendar year from Tk 11,71,365 crore in the same month last year, according to the central bank’s latest statistics.
“The trend indicates that more people are hoarding cash due to lack of confidence in banks,” former Bangladesh Bank (BB) Governor Dr Salehuddin Ahmed told The New Nation on Saturday.
He said that repeated loan scandals, falling interest rates and questioning by bank officials eroded confidence of the people in banks forcing them to withdraw cash from banks and hoard it at home. “A section of people may be hoarding cash either to launder it or stuffing under mattresses for election expenditure,” he said.
Terming it as a ‘bad sign’ for economy, Dr Salehuddin Ahmed held the central bank responsible for the situation, which can invite adverse economic consequences in the days to come.
“As immediate impact, it could slow down deposit growth, raise interest rates and fuel inflation,” he said, urging the central bank to take proactive measures to tackle the situation immediately.
“The ups and downs of currency outside the banks are a normal phenomenon. But when it rises sharply in an election year that signals something else,” Dr Ahsan H. Mansur, Executive Director of Policy Research Institute (PRI) told The New Nation.
He said, the situation fuels fears of money laundering and use of black money during the upcoming polls.
“Usually money expenditure picks up ahead of elections. Political bigwigs and party leaders may be withdrawing big amount of money from banks for bearing election expenditure pushing up the amount of hard cash outside banks,” he said.
Dr Ahsan H. Mansur further said that the situation also signals expansion of black economy.
When asked, he said it would not create liquidity pressure on banks, as the hard currency kept outside banking system would come back after certain period of time.
Currency outside the banking system rose sharply in 10 months of the current calendar year sounding alarms for the economists, some of whom fear money laundering and expansion of black economy in an election year.
The amount of coins and notes kept outside banks rose by 14 per cent or Tk 13,34,439 crore until May of the current calendar year from Tk 11,71,365 crore in the same month last year, according to the central bank’s latest statistics.
“The trend indicates that more people are hoarding cash due to lack of confidence in banks,” former Bangladesh Bank (BB) Governor Dr Salehuddin Ahmed told The New Nation on Saturday.
He said that repeated loan scandals, falling interest rates and questioning by bank officials eroded confidence of the people in banks forcing them to withdraw cash from banks and hoard it at home. “A section of people may be hoarding cash either to launder it or stuffing under mattresses for election expenditure,” he said.
Terming it as a ‘bad sign’ for economy, Dr Salehuddin Ahmed held the central bank responsible for the situation, which can invite adverse economic consequences in the days to come.
“As immediate impact, it could slow down deposit growth, raise interest rates and fuel inflation,” he said, urging the central bank to take proactive measures to tackle the situation immediately.
“The ups and downs of currency outside the banks are a normal phenomenon. But when it rises sharply in an election year that signals something else,” Dr Ahsan H. Mansur, Executive Director of Policy Research Institute (PRI) told The New Nation.
He said, the situation fuels fears of money laundering and use of black money during the upcoming polls.
“Usually money expenditure picks up ahead of elections. Political bigwigs and party leaders may be withdrawing big amount of money from banks for bearing election expenditure pushing up the amount of hard cash outside banks,” he said.
Dr Ahsan H. Mansur further said that the situation also signals expansion of black economy.
When asked, he said it would not create liquidity pressure on banks, as the hard currency kept outside banking system would come back after certain period of time.
