Excess liquidity in Bangladesh's banking sector reached an all-time high, crossing Tk 4.08 lakh crore at the end of June 2026, driven by rising bank deposits and a distinct reluctance among entrepreneurs to take new loans for business expansion or establishing industrial plants.
Central bank data shows that deposit growth in the banking sector stood at 10.74 percent in June, whereas credit growth to the private sector slowed to 4.47 percent during the same period.
The widening gap between deposit accumulation and credit disbursement has caused idle money in banks to more than double over the past two years—rising from Tk 1.93 lakh crore two years ago and Tk 2.83 lakh crore in June last year to over Tk 4.08 lakh crore in June 2026.
The entrepreneurs are hesitant to take loans. Bankers attribute the sharp decline in appetite for new industrial investments to several persistent economic challenges.
Unreliable and uncertain supplies of gas and electricity remain the primary impediment. Business owners note that if industrial production cannot run smoothly, servicing bank loan interest turns into a major financial strain.
High interest rates, increased business costs, political and economic uncertainties, law and order concerns, and shifting tax and regulatory policies have made entrepreneurs wary of taking on new investment risks.
Currently, the bulk of loans being disbursed is going toward working capital, raw material imports, and daily operational needs, with minimal demand for setting up new industries or executing major business expansions.
Increased Caution Among Banks
In addition to low demand from borrowers, commercial banks have significantly tightened their lending criteria. Following past trends where extensive unverified lending led to a massive surge in non-performing loans (NPLs), financial institutions are exercising extreme caution.
Banks are now rigorously assessing business viability, collateral, cash flow, and repayment capabilities before approving new loans. With weaker banks suffering reduced lending capacity, stronger banks holding surplus funds are choosing to park money in safer government instruments—such as treasury bills and bonds—rather than risking capital in high-risk private sector loans.
Former President and CEO of Bank Asia, Md. Arfan Ali, told UNB that entrepreneurs remain hesitant due to an unimproved business environment.
He added that the bulk of surplus liquidity is concentrated within a few solid banks, which prefer investing in risk-free government securities.
"Unless electricity, gas, and infrastructure problems are adequately addressed, investment demand will not rebound," he emphasized, noting that lowering interest rates alone will not alter the landscape without improvements in the broader business environment.