THE persistent rise in cash circulating outside the banking system is a concerning trend that demands urgent attention.
An English newspaper on Thursday reported that since early 2024, the volume of money kept outside banks has surged by Tk 44,000 crore, a 17 per cent increase in just nine months.
The reasons behind this troubling development are multifaceted, but they all point to one underlying issue: almost zero crisis of confidence in banks under an autocratic rule.
However, political uncertainty, especially in the lead-up to the national elections earlier this year, worsened the situation.
Deposed dictator Hasina and her political allies kept a significant amount of money in their personal family vaults to secure victory in the manipulated election held on January 7.
This claim appeared to be substantiated when Hasina fell from power, and large sums of cash were discovered in Ganobhaban and the residences of other Awami League leaders across the country.
Unfortunately, this illegal money was not recovered.
Instead, it has been illegally transferred to individuals now attempting to seize power, who are also providing shelter to political activists of the ousted regime.
Moreover, in some cases, fears of potential account freezes have pushed many businesses closely associated with the previous government to keep their money at home.
Others — particularly those with illicit assets — prefer to avoid the scrutiny that comes with formal banking.
Inflation continues to bite, eroding people’s purchasing power and forcing them to withdraw money to cover daily expenses.
The more people hold cash, the greater the liquidity crunch for banks, which are forced to raise interest rates, making loans more expensive and further choking economic growth.
The longer this continues, the deeper the divide between the public and the banking system grows.
Concerted action is needed on multiple fronts to reverse this alarming trend.
Restoring trust in banks must be a top priority. Financial institutions must improve transparency, and regulators should enforce stricter oversight to ensure that depositors’ money is safe.
We must emphasize that the banking sector needs to assure depositors their funds are secure and will not be plundered by those in power.
Only through such actions can the country stem the cash outflow from the formal banking system and ensure long-term financial stability.
The road to recovery may be challenging, but it must be travelled without delay.
