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Bank & Finance - December 31, 2022

Bank depositors’ rush for cash withdrawal slows

Industry Desk: Depositors’ trust in the country’s banking system, which was dented recently, has shown a sign of improvement as the rush for money withdrawal slows.
Few days ago, some news on social media made the depositors wary about the health of banks’ liquidity and safety of their deposits, prompting them to seek withdrawal of money from the banks. This resulted in around Tk 22 billion being pumped out every day from the Bangladesh Bank vault.
Now in a reverse trend, instead of being pumped out, the central bank vault received Tk 9.31 billion in a single day last week, said the Bangladesh Bank officials.
The rush for money withdrawal began in October, and until December 19, a total of Tk 380 billion was withdrawn by the depositors. A huge amount of cash, which could be Tk 2.78 trillion in total, is now out of the banking system.
Besides, the commercial banks have Tk 190 billion in their vaults to meet daily liquidity demand, which was even lower, reducing to Tk 130-140 billion in recent months, the central bank data shows. Most of the banks increased the stock of money in their vaults to meet liquidity demand. Meanwhile, the central bank released new notes apart from old and somewhat shabby notes to ease the pressure of high liquidity demand.
Besides, an amount of Tk 220 billion was parked in the chests of the central bank and the state-owned Sonali Bank. Usually, more than Tk 400 billion is kept in these chests. The total amount of printed money is Tk 3,195 billion now, which was Tk 3,135.86 billion at the end of October this year.
The banking sector insiders said at present the banks have Tk 16.5 trillion as deposits and Tk 13 trillion as loans. However, all the money is not in liquid state. For instance, a total of Tk 30 billion, out of Tk 220 billion in the central bank vault, is waiting to be burned down while Tk 150 billion is old, spotted and shabby, which the banks returned to the central bank as non-issue notes.
The central bank usually releases some of the non-issue notes after verifying their condition, but this time non-issue notes were released without any such verification alongside new notes to address the liquidity crisis, the central bank officials informed.
According to them, the people are withdrawing money for various reasons. The banking sector insiders and central bank officials said a large number of people are keeping their money at home after being concerned about the liquidity situation in banks.
The recent loan scandal in some banks including the Islamic Bank Bangladesh Ltd played the key role in the depositors’ rush for money withdrawal.
The concerns among the depositors waned after the central bank’s appointment of an observer at the Islamic Bank Bangladesh Ltd and the Fast Security Islamic Bank Ltd. Stepping up daily loan monitoring at the Social Islami Bank Ltd (SIBL), the Global Islamic Bank and the Union Bank operated by Chattogram-based S Alam Group.
“People were withdrawing money after getting confused by the propaganda run on some social media sites. But keeping money at home is not a solution. So, the people have again returned to the banks to park their money,” said Bangladesh Bank executive director and spokesperson Mezbaul Huq.
“The central bank, on several occasions, has assured the depositors of the safety of their money parked at banks. The Prime Minister also spoke about the issue. So, the people are gaining their confidence back,” he said, hoping that the situation will be okay by the month of January.

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