Cash supply to banks falls short ahead of Eid amid note shortages
Cenbank say no liquidity crisis, problem stems from shortage of printed currency
Several commercial banks for over a week have been receiving far less cash than requested from the Bangladesh Bank (BB) due to a shortage of newly printed notes, creating pressure on lenders ahead of Eid-ul-Adha.
Central bank officials said the problem stemmed from a shortage of printed currency, not liquidity, while bankers warned it could still weaken depositor confidence and spark panic.
Bankers said one commercial bank requested Tk580 crore in cash on Thursday but received only Tk120 crore. Another bank received Tk40 crore against a demand for Tk120 crore, while others received Tk35 crore instead of Tk100 crore and Tk45 crore instead of Tk115 crore.
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A senior executive of a bank said the Bangladesh Bank was supplying only around 30-40% of the cash sought by banks. "This situation has continued for the last seven to eight days."
He added that the central bank was encouraging greater use of electronic transactions instead of cash.
The managing director of another private commercial bank said cash withdrawals are typically higher on Thursdays, and surges before Eid as customers withdraw money from branches and ATM booths.
"Demand for cash rises sharply around cattle markets during Eid-ul-Adha. Companies also withdraw cash to pay bonuses and allowances to workers ahead of the festival," he said.
Shortage of printed currency
Central bank officials said Tk4,000 crore will be supplied from the mint to Bangladesh Bank today. They said the banking sector is not facing any liquidity crisis, but acknowledged a shortage of newly printed notes.
They added that Bangladesh Bank is withdrawing damaged notes from circulation while preparing to supply larger denominations instead of smaller ones, as demand for higher-value notes typically rises during Eid-ul-Adha.
They further mentioned that the central bank had requested Tk16,000 crore in fresh notes from the mint ahead of Eid. However, due to shortages of paper and ink, only around Tk8,000 crore is expected to be supplied.
Besides, around Tk15,800 crore worth of old-design notes featuring the image of Sheikh Mujibur Rahman remain stored at the Security Printing Corporation – – the main printer of banknotes. However, Bangladesh Bank is reluctant to release those notes into circulation.
Officials said the total currency stock now stands at around Tk24 lakh crore, while demand for printed money exceeds Tk3.2 lakh crore. The long suspension of old-design notes has widened the gap between demand and supply, contributing to the current strain.
Bangladesh Bank spokesperson and Executive Director Arif Hossain Khan said banks would receive cash based on demand in phases.
"The newly printed notes will be distributed among banks. Even if a bank now receives less cash than requested, additional demand will be met later," he added.
Bankers warn of panic
One private bank managing director warned that any suggestion of a liquidity crisis could undermine depositor confidence and trigger panic.
"If customers hear banks are facing liquidity problems, they may think banks do not have enough money. That could create panic at a time when confidence in the banking sector is already fragile," he said.
He added that withholding old-design notes had made it difficult to manage the growing Eid-related demand for cash. "The central bank should have anticipated the surge in cash demand before Eid."
