BM Desk: The nation’s banking industry is experiencing a crisis of confidence rather than a money issue. By the end of June 2025, the industry will have a net surplus liquidity of over Tk 265,000 crore, more than twice the actual need, according to Bangladesh Bank.
Even though it has a substantial quantity of money, the market does not actively use it.
Deep mistrust of the banking system as a whole, stagnant loan demand, and uncertainty in the investment climate are the primary causes of this. In particular, the entire industry has suffered from the liquidity issue and lack of transparency in certain Sharia-based banks owned by the S Alam Group, which has led to a sort of “systemic distrust.”
Despite certain reforms following the change of government, the investment climate remains unstable, according to Arfan Ali, the former managing director of Bank Asia. Many people are afraid to take out loans because of high interest rates, economic uncertainty, and past investment projections. As a result, money is building up in banks but not being utilized in the economy.
According to economists, excess liquidity alone cannot turn the economy around; if it does not enter the productive sector and if people lack confidence, it will just be reflected in statistics.
Remittances and reserves have provided some reassuring news. Foreign exchange reserves reached $31.77 billion at the start of the fiscal year 2024–25, while expatriate income rose by around 27% to $30.33 billion. As the dollar enters the banking channel and market stability returns, the decline in hundi has lessened the pressure on the currency, which is good for the economy, according to Dr. Zahid Hossain, a former Chief Economist at the World Bank’s Dhaka Office.
The picture of bank-based liquidity is different, though. Some Shariah-based and specialty banks continue to struggle with liquidity, despite the fact that public and private sector banks have surpluses of Tk 88,000 crore and Tk 1,44,000 crore, respectively.
The government also borrowed more money from domestic sources, totaling Tk 1,20,000 crore in June. The remaining savings certificate balance at the time was Tk 3,33,000 crore.
In general, the nation’s banking industry is currently dealing with two realities: money is there but it is not moving, remittances and reserves are rising, but investment is not. Even with the liquidity, the economy is not moving quickly.
