Bangladesh grappling with a dearth of fresh banknotes

Mirza Hasib, a private jobholder, was visibly upset after using an ATM in Banashree.

Usually, the notes he gets are fresh, if not brand new. But this time, most were worn out, and two of the Tk500 notes were in such poor shape that they were barely usable.

"I wasn't expecting this kind of money to come out of an ATM," Hasib said.

But he found no immediate solution. When he complained to the ATM booth's security guard, the guard simply said there was no way to return money at the booth. If he wanted to exchange the damaged notes, he would have to visit his bank with a memo.

"As someone with a full-time job, I barely have time to breathe. Now, just for two torn Tk500 notes, I'm supposed to spend over an hour going to the bank and waiting there?" Hasib asked.

Shamim Ara, a housewife from Moghbazar, faced a similar issue. After withdrawing cash from the bank in mid-April, she found several notes in poor condition. While she managed to spend most of them, a few torn Tk100 and Tk500 notes are now causing trouble.

"Even rickshaw pullers don't want to take these notes," said Shamim Ara. "They say the money will fall apart from sweat if they keep it. So they suggest I use them at grocery stores — but now even grocers are picky and return any damaged notes."

A visit to the money exchange stalls at the entrance of Gulistan's underground market last week painted a clearer picture. 

These vendors typically buy torn notes from people at a lower rate — offering Tk450 to Tk480 for a Tk500 note, for instance. In short, people exchange damaged notes there, by accepting a small loss.

"In Bangladesh, a change in power often brings disputes over symbols associated with the previous regime. Since currency is such a sensitive and essential part of the economy, we should consider using neutral imagery in the future — something that won't be politicised regardless of who's in power." Dr Abdullah Al Mahmud, professor and director, Department of Banking and Insurance, Dhaka University

On the flip side, many people also buy crisp new notes from these dealers — at a markup. A bundle of 100 new Tk20 notes (worth Tk2,000) sells for Tk2,100. New bundles of Tk50, Tk100, and Tk500 notes are also available, typically costing Tk80 to Tk150 more than their actual value.

During Eid, this unofficial exchange becomes particularly profitable, as the money traders in Gulistan make additional gains both when buying and selling old or new currency notes, respectively.

Ahead of the last Eid-ul-Fitr, Bangladesh Bank suspended its usual public distribution of new notes. Instead, it directed banks to keep fresh notes deposited at their branches without exchanging them. 

As a result, comparatively more people turned to these dealers for fresh notes at the time — and the rush has not slowed down yet. While these vendors are usually seen idling during off-season, lately, they have been busy handling a steady stream of customers.

"People are really struggling with torn notes," said Sadik Mia, a money dealer. 

"Some are coming from as far as Faridpur or Tangail with Tk50,000 to Tk100,000 just to exchange. But we're not making big profits — our supply is low too. Even though there's demand, we often have to turn people away."

He added that most of the customers seeking fresh notes are small-scale local businessmen. Due to their higher demand and larger transactions, dealers tend to prioritise them — leaving many individual or retail customers at a disadvantage.

Koushik Ahmed, a student at Dhaka University who runs a small sweetened yogurt business on campus, is one such frustrated customer. 

"Students often pay me with torn notes after eating," he said. "I can't refuse them, so I end up collecting quite a few. Over the past one week, I've received at least twenty damaged Tk50 and Tk100 notes."

Hoping to exchange them in Gulistan at a small loss, he found most shopkeepers unwilling to deal in such small quantities. 

"One seller told me unless I take a full bundle of Tk50 notes, he won't sell to me. When I asked why, he said demand is so high now, they don't want to lose bigger profits by selling in small amounts," Koushik said.

But what's behind this widespread trouble with fresh notes in Dhaka and across the country? 

Reportedly, Bangladesh Bank's sudden decision to halt the release of new currency notes bearing Sheikh Mujibur Rahman's image since the beginning of April has led to a shortage of notes, leaving mostly torn and worn-out currency in circulation. 

Around Tk15,000 crore worth of fresh notes, already printed and stored at the central bank and commercial banks, remain unused, causing financial setbacks and growing public frustration. 

The central bank's policy shift, which began in December, has also delayed the introduction of new-design notes, with printing set to start in May at the Security Printing Corporation mint. 

However, the mint can only produce three denominations at a time, limiting capacity, as the market requires 150 crore new notes annually, while the mint can produce just 120 crore.

Before Eid-ul-Azha, Bangladesh Bank is expecting to release nine banknotes with updated designs. The redesigned notes, ranging from Tk2 to Tk1,000, will feature graffiti from the July Uprising alongside symbols of the country's heritage and culture. The designs for all denominations have already been finalised.

Bangladesh Bank spokesperson Arif Hossain Khan said that it usually takes at least one to one and a half years to print new design notes. However, considering customer demand, the new notes will be issued before Eid-ul-Azha.

Even once new notes are printed, it will take five to seven years to phase out the old ones. Currently, Bangladesh's currency in circulation includes paper notes of various denominations — 2, 5, 10, 20, 50, 100, 200, 500, and 1,000 — all featuring Mujib's image. 

As of February, the total currency in circulation amounted to Tk374,602 crore, with Tk271,495 crore in public hands, Tk26,887 crore in bank vaults, and Tk76,220 crore in Bangladesh Bank's vaults.

Dr Abdullah Al Mahmud, professor and director of Dhaka University's Department of Banking and Insurance, weighed in on the situation, calling the withholding of already printed banknotes both harmful to the economy and an unnecessary source of public suffering.

"In countries like India or the United States, currency notes often feature images of national leaders or iconic figures. But even when governments change, there's no controversy over these images," he said.

"In Bangladesh, however, a change in power often brings disputes over symbols associated with the previous regime. Since currency is such a sensitive and essential part of the economy, we should consider using neutral imagery in the future — something that won't be politicised regardless of who's in power."

He further explained that the issue with currency notes is more complicated than changing the name of a place or institution, as a large volume of money cannot be easily withdrawn from circulation. Removing all old notes from circulation could take at least five to seven years.

"Therefore, those responsible for determining the design or image of new notes must take this long-term impact into consideration," he emphasised.

Despite the current challenges, Professor Al Mahmud believes that a positive outcome can still emerge from the situation, specifically by accelerating efforts to transition Bangladesh into a cashless society.

"Given the difficulties customers are facing with cash notes, those who are able should opt for alternative transaction methods. While not everyone may have access to credit or debit cards, mobile financial services like bKash and Nagad are now widespread and accessible to people at all levels," he explained. 

"Even grocery stores are now using these services. If people start using mobile financial services more frequently, not just to send money but for regular transactions, it will benefit them, and they will also develop the habit of cashless transactions, which will bring long-term benefits."