Currency outside banks surges

Staff Reporter :
The flow of currency outside the banking sector has increased by 27. 27 percent. As a result, there has been a liquidity crisis in commercial banks which results an increasing depolition of surplus liquidity of the banking sector.
Due to this, in recent times some banks are aggressively borrowing money at 9 percent interest rate from other banks for the short term to mitigate their daily cash maintenance requirement.
According to the data from Bangladesh Bank (BB), at the end of 2022, the amount of cash outside the banking sector or in the hands of people stood at two lakh 68 thousand 181 crores, which was Tk 2,36,448 crore in June 2022 and Tk 2,10,723 crore in December 2021.
The amount of cash in people’s hands has increased by 57 thousand 458 crores or 27.27 percent in last one year, data reveled form BB.
The growth of deposits in the banking sector has also decreased in 2022. Last year the growth of deposits was 5.66 percent which was 9.21 percent in 2021. Due to this, the surplus liquidity has decreased by Tk 65 thousand 778 crore in the last one year, to the BB data.
While addressing the causes and effects of holding money to the peoples’ hand, Anis A Khan, former chairman of Association of Bankers Bangladesh (ABB) said that because of the galloping inflation the people are keeping money in their hand as a precautionary measures. As a result money is not coming to the bank.
Apart from this, the news of some irregularities and corruption in the banking sector has created panic among the common people. That is why many have withdrawn money from the bank and kept it at home. As a result, cash has increased in people’s hands outside the banking sector
‘Hundi’ also increases cash in people’s hands, as the transactions through ‘hundi’ are done hand to hand basis. But increasing cash in the hands of people is a big loss for the economy, he added.
Arfan Ali, former MD of Bank Asia said while addressing the another reason of banks liquidity stress that , after the conversion of the stimulus package loans into term loans and extending the repayment time is another reason for the liquidity stress. If the loans would have been returned to the banks, they could lend again.
In 2023, Banks will have to prudently maintain liquidity and credit management. Considering the present scenario of savings and inflation, it will be hard for banks to get additional money from the market, he alarmed.