Deposits in Bangladesh banks plunge by Tk 100bn in August

Concerns about bank stability lead to withdrawal of funds and a decrease in deposits

Bank deposits dropped by Tk 100 billion in August, as concerns over bank stability following the government's collapse have led many customers to withdraw their funds and halt further deposits.

According to the latest data from Bangladesh Bank, deposits across 61 banks stood at Tk 17.31 trillion by the end of August, down from Tk 17.42 trillion in July.

This marks a decrease of Tk 109.07 billion, a decline of 0.63 percent in just one month.

In comparison, deposits had increased by Tk 232.54 billion during the same period in 2023, from July to August.

The reduction in deposits indicates a rise in the amount of cash outside the banking system. By the end of July, cash outside banks amounted to Tk 2.90 trillion, rising by Tk 19.97 billion to Tk 2.92 trillion in August.

A senior official from Bangladesh Bank told bdnews24.com that banks operating under Islamic principles, particularly those controlled by the Chattogram-based S Alam Group, are facing liquidity crises due to the withdrawal of funds.

After the fall of the Sheikh Hasina regime, rumours regarding these banks prompted customers to withdraw their funds instead of depositing money. This trend has negatively affected overall deposit collections across the sector.

Bangladesh Bank spokesperson Husne Ara Shikha said, “Following the government’s fall in August, there was an impact on bank deposits. Many customers withdrew their funds, fearing that Islamic banks might close. However, confidence in Islamic banks is gradually returning, and deposits are beginning to increase."

Zahid Hossain, former chief economist at the World Bank's Dhaka office, remarked, "There has been longstanding distrust towards Islamic banks, and the government's fall heightened fears about the safety of deposits. This has led to increased withdrawals."

Zahid Hossain, a former lead economist at the World Bank’s Dhaka office, said: “There has been a long-standing distrust towards Islamic banks. The political turmoil generated fears among the public about the availability of funds in these banks, prompting customers to withdraw their money.”

He also pointed out that previous mismanagement and irregularities had severely harmed these banks, as the group previously controlling them took loans without repaying, further deteriorating their financial conditions.