Published: 12:55 AM, 04 September 2026
Cash Crunch Still Squeezes Banking System
Bangladesh’s banking sector continues to face a persistent cash crunch, putting pressure on banks, businesses and ordinary depositors despite various measures taken by the authorities to improve liquidity. The shortage of readily available cash has emerged as a major concern for a financial system already struggling with weak loan recovery, rising non-performing loans and declining public confidence.
The liquidity pressure is particularly challenging for banks that have experienced substantial deposit withdrawals or are carrying large volumes of troubled loans. While some banks have adequate liquidity, others are finding it increasingly difficult to meet day-to-day obligations. The uneven distribution of liquidity across the banking system has further complicated the situation.
For businesses, the cash crunch can translate into tighter access to working capital and higher borrowing costs. Small and medium-sized enterprises are especially vulnerable because they often depend heavily on bank financing to pay workers, purchase raw materials and maintain regular operations. Prolonged liquidity constraints could therefore affect investment, employment and economic activity.
Ordinary depositors are also watching the situation closely. Confidence is the foundation of any banking system, and rumours about the financial health of individual banks can encourage customers to withdraw deposits. If such behaviour becomes widespread, even fundamentally sound institutions may come under unnecessary pressure.
Bangladesh Bank has taken several steps in recent years to manage liquidity and maintain stability in the financial sector. However, liquidity support alone cannot resolve deeper structural weaknesses. Banks must strengthen corporate governance, recover defaulted loans, improve risk management and ensure that new lending is based on sound commercial principles.
The problem of non-performing loans remains particularly serious. When a significant portion of bank funds becomes trapped in unpaid loans, banks have fewer resources available for productive lending. Recovering these funds and establishing greater discipline in credit management are therefore essential to restoring the sector’s health.
Economists argue that the government and the central bank need to strike a careful balance. Excessive monetary tightening could worsen liquidity conditions and restrict private-sector activity, while indiscriminate liquidity injections could fuel inflation or allow inefficient institutions to avoid necessary reforms.
For Bangladesh, the immediate priority should be to preserve confidence while addressing the underlying weaknesses of the banking sector. Greater transparency, stronger supervision and effective action against loan defaulters can help rebuild trust.
The present cash crunch should therefore be viewed not simply as a shortage of money but as a warning about the broader health of the financial system. A stable banking sector is indispensable for Bangladesh’s economic progress. Ensuring that banks remain liquid, accountable and capable of financing productive investment will be crucial for sustaining growth and protecting the interests of depositors in the years ahead.
Nasir Uddin Shah is Chief
Reporter at The Asian Age.
