Bangladesh’s commercial banks borrowed a record Tk 1.45 trillion from the central bank in June 2025 through the repurchase agreement (repo) facility, highlighting a deepening liquidity crisis driven by sluggish deposit growth, surging non-performing loans (NPLs), and mounting government borrowing.

According to Bangladesh Bank (BB) data, around 75 per cent of the total borrowing came through 14-day maturity repos, while the remainder—Tk 275 billion and Tk 91.05 billion—was accessed via 7-day and overnight tenures, respectively.

The rising reliance on this short-term borrowing instrument suggests that many banks are struggling to meet their local-currency obligations.

The repo-backed liquidity support facility, which enables banks to access cash by pledging securities, has seen a sharp rise in usage over recent months. In May, banks borrowed Tk 1.33 trillion, up from Tk 940 billion in April and Tk 838 billion in March, reflecting an accelerating trend of dependence on central bank support.

Insiders attribute the liquidity stress to multiple structural issues. Deposit growth remains low—just 8.21 per cent by April 2025, down from over 12 per cent three years ago.

Moreover, non-performing loans have soared to Tk 4.20 trillion—about 24 per cent of the total Tk 17.13 trillion in loans disbursed by March 2025—indicating systemic fragility. The same BB official noted that banks have been left with few alternatives but to turn to the central bank’s repo window to address ongoing credit mismatches.

The liquidity stress is exacerbated by government borrowing from the banking sector, which amounted to around Tk 1.24 trillion in the fiscal year 2024–25. Although the government repaid over Tk 300 billion to the BB during this period, the net impact has constrained liquidity further.

A treasury head at a commercial bank, requesting anonymity, stated that although the BB’s repo facility is primarily designed to help banks meet their cash reserve ratio (CRR) requirement—currently 4.0 per cent or roughly Tk 750 billion—many lenders are using these funds to invest in long-term government securities for better returns amid weak credit demand in the private sector.

He warned that such practices are contributing to a distortion in the yield curve, which pushes down returns on Treasury bills and bonds, and distorts the monetary transmission mechanism. “If the central bank halts the repo window for even a short period, several banks may not be able to maintain operations,” the official said.

The rising use of short-term central bank liquidity for longer-term investments also reflects deeper structural imbalances. With weak deposit growth, rising defaults, and low confidence in financial governance, the sector remains under intense pressure.