Excess liquidity hits all-time high amid slag’s private investment

Unused liquidity across Bangladesh’s banking sector hit an unprecedented benchmark, breaching the Tk 4.08 lakh cr threshold by the close of June 2026.

The historic surge is primarily anchored by steady retail deposit growth juxtaposed against a widespread reluctance among industrial promoters to seek capital for capacity expansion or new venture creation.

Data released by the central bank highlights a stark structural divergence in the financial system: year-on-year deposit growth reached 10.74 percent in June, whereas private sector credit expansion slowed to a meager 4.47 percent.

This imbalance has caused unallocated capital within commercial banks to double over a two-year horizon, escalating sharply from Tk 1.93 lakh crore two years prior and Tk 2.83 lakh crore in June 2025 to its current record high.

Industry leaders and financial analysts attribute the widespread hesitancy to persistent structural headwinds, most notably severe deficiencies in energy infrastructure.

Unreliable electricity and gas supply remain the premier constraint for production-oriented enterprises. Business owners caution that operating facilities below capacity makes servicing compound interest obligations an unmanageable financial burden.

Beyond utility disruptions, high borrowing costs, elevated operational expenses, macro-level uncertainties, law and order concerns, and shifting fiscal policies have jointly eroded risk appetite.

Consequently, current credit disbursement is overwhelmingly directed toward short-term working capital, raw material financing, and operational maintenance, with virtually no traction in Greenfield industrial projects or major capital expenditure programs.

On the supply side, institutional lenders have adopted rigorous risk-aversion strategies to insulate balance sheets from non-performing assets. Following historical episodes of lax credit evaluation that resulted in elevated bad debt, financial institutions are subjecting all applications to strict cash flow, collateral, and viability audits.

Solid banks holding the lion’s share of surplus capital are increasingly opting to park excess funds in risk-free government securities, such as treasury bills and long-term bonds, rather than taking credit exposure in an unpredictable commercial environment.