Deposit growth in Bangladesh’s banking system has been on a steady decline in recent months, aggravating a growing liquidity shortage amid an extended period of economic slowdown, central bank officials and commercial bankers have said.

Data from the Bangladesh Bank (BB) indicate that total deposits reached Tk 18.32 trillion by the end of May 2025, representing a 7.77% year-over-year increase. However, this growth is slowing, having stood at 11.04% in December 2023, before falling to 8.51% in March and 8.21% in April.

The diminishing deposit inflow has been attributed to persistent inflation, reduced economic activity, and declining public trust in the banking sector, especially after several loan scandals surfaced during the previous government’s tenure. As a result, more currency is remaining outside formal financial channels, intensifying the liquidity crunch.

According to BB figures, the volume of cash held outside the banking system rose to Tk 2.94 trillion in May from Tk 2.77 trillion in April.

A senior BB official, speaking on condition of anonymity, said the decline in short-term demand deposits is particularly concerning, even though long-term deposits have increased slightly. “The confidence level among depositors remains weak, and fresh inflows are still sluggish,” the official noted.

Mutual Trust Bank Managing Director Syed Mahbubur Rahman linked the trend to falling real wages and shrinking employment in the formal sector. “People are finding it harder to save after covering daily expenses,” he said, adding that banks have invested more in government securities due to limited private sector demand.

The liquidity shortfall has led many lenders to depend more heavily on the central bank’s repo facility. A treasury head at a private bank said there has been a “massive rise” in repo-backed borrowing, reflecting the sector’s ongoing struggle to meet fund requirements through regular deposit mobilisation.