Bangladesh’s banking sector is experiencing a sharp rise in excess liquidity, reaching Tk 3.06 trillion by the end of August 2024, up from Tk 1.74 trillion a year earlier, according to Bangladesh Bank data. The surge follows the removal of the lending rate cap after the fall of the previous government, which led to higher deposit rates and increased inflows into stronger banks. However, political instability, high interest rates, and cautious lending have slowed private sector credit growth to 6.29% in September. State-owned banks hold Tk 1.43 trillion in excess liquidity, while private and foreign banks hold Tk 1.73 trillion and Tk 0.32 trillion respectively. Sonali Bank tops the list with Tk 623.22 billion in surplus funds. Meanwhile, several weaker banks, including National Bank and AB Bank, are facing liquidity shortfalls. Bank executives attribute the uneven liquidity situation to depositor confidence shifting toward stable institutions and reduced credit demand from both government and private sectors.