Excess liquidity in the county鈥檚 banking sector increased slightly in September after a sharp fall in the previous couple of months.
Bangladesh Bank data showed that excess liquidity increased to Tk聽1,78,091 crore in September from Tk聽1,75,337 crore in August and Tk 1,78,713 crore in July. It was Tk聽1,95,824 crore in June.
Experts said that the excess liquidity had declined sharply in July and August amid the nationwide student protests that began on July 1, eventually sparking a broader civil uprising against the autocratic rule of Awami League government.
Depositors, already withdrawing funds due to soaring inflation and widespread irregularities in banks under the Awami League regime, had intensified withdrawals in the period, they said.
The depositors鈥� confidence began to build after the fall of the Awami League government on August 5 as the depositors started bringing back their money to banks, they said.
High deposit rate may also attract depositors to keep their money in banks, they added.
Therefore, banks鈥� deposits increased to Tk 17.41 lakh crore in September from Tk聽17.31 lakh crore in August.
The volume of cash circulating outside the banking system also declined to Tk 2.83 lakh crore in September from Tk 2.93 lakh crore in August.
Of the surplus liquidity in the banking sector, more than 80 per cent was in the form of securities, including treasury bills and treasury bonds.
Though the excess liquidity increased marginally in September, banks were facing a severe liquidity crunch due to a combination of factors, including high defaulted loans, large-scale dollar sales by the central bank, low deposit growth, and increased cash being held outside the banking system.
Bankers also said that the clients鈥� trust in the banking sector eroded amid massive loan scandals and irregularities in several banks during the now ousted Awami League regime.
Additionally, several banks 鈥� particularly Shariah-based and some conventional ones 鈥� were struggling to return deposits to customers, exacerbating the crisis and triggering further panic among depositors, they said.
The instability of the dollar in the financial market led the Bangladesh Bank to sell large amounts of dollars, draining equivalent local currency from the banking system and further straining liquidity, they said.