Bangladesh’s banking sector recorded excess liquidity of more than Tk408,000 crore at the end of June, as private investment and demand for loans weakened. Bangladesh Bank data showed surplus funds rose from Tk327,877 crore in May and Tk378,135 crore at the end of March. Deposits continued to increase, but banks struggled to deploy the additional money because new investment activity remained slow.

Banking-sector sources cited gas and electricity shortages, high interest rates, political uncertainty and law-and-order conditions as factors reducing appetite for new investment. Greater caution by banks in lending has also slowed private-sector credit flow. Deposit growth stood at 10.74 percent in June from a year earlier, while private-sector credit growth fell to 4.47 percent, described in the report as a historic low.

Banks are placing funds in treasury bills and bonds, the call-money market, deposits with other banks and Bangladesh Bank’s Standing Deposit Facility. Bangladesh Bank recently reduced the repo rate from 10 percent to 9.5 percent and announced a Tk60,000 crore incentive package to support economic recovery and reopen closed factories. Banks holding excess liquidity are expected to provide Tk41,000 crore under the package.