After a year, excess liquidity in Bangladesh’s banking system fell below Tk2 lakh crore, owing to weak deposit growth and a slow increase in credit demand. The amount of excess liquidity in Bangladesh’s banking system declined to Tk1,98,115.64 crore at the end of March 2022, according to the latest Bangladesh Bank data.
Excess liquidity in the banking sector of Bangladesh hit a new high of Tk2,31,463 crore in June 2021, up from Tk1,03,358.12 crore in January 2020. Since April 2021, the supply of excess liquidity has stayed over Tk2 lakh crore.
The banking sector’s excess money reached Tk 2,01,677.9 crore in April 2021, thanks to the central bank injecting a large quantity of cash for a quick recovery of the Covid-hampered economy. The unexpected spike in surplus liquidity in the financial system was caused by a series of stimulus packages and bank purchases of the dollar. Total excess liquid assets continued to decline in March 2022 compared to the previous months of the current fiscal year, due to a gradual increase in credit demand and Bangladesh Bank’s intervention in the foreign exchange market through dollar sales, according to the most recent BB report.
Furthermore, bank deposit growth has slowed significantly in recent months, with deposit rates in most banks becoming discouraging to savers and investors, according to bankers. The quantity of excess liquidity in the country’s banking sector has decreased as a result of a lower supply of liquidity against rising demand. The banking system’s deposit growth rate was more than 12% year over year in January 2020, and it was about 14 per cent in the first half of 2021.
However, the growth rate fell to 9.05 percent in March, when the growth rate of lending to the private sector increased to 11.29 percent, after falling to 7.55 percent in May 2021 due to the coronavirus outbreak. Throughout the current fiscal year, the central bank’s supply of over $4 billion squeezed the supply of the local currency taka, resulting in an excess liquidity fall on the market. Despite the fact that many banks had large amounts of excess liquidity, some were having trouble managing the demand-supply gap, forcing them to borrow from other sources, including the interbank call money market.
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