Introduction to Bangladesh’s Economy
The country’s banking sector recorded deposit growth of less than 8% in June, despite an increase in remittance inflows, as inflationary pressures, sluggish private investment, and weak job creation continue to weigh on people’s savings capacity. According to Bangladesh Bank data, total deposits in the banking sector stood at Tk18.78 lakh crore as of the end of June 2025, marking a 7.77% year-on-year increase.
Deposit Growth in Bangladesh
The growth was only slightly higher than May’s 7.73%. In contrast, deposit growth in June 2024 had been 9.25%, before entering a persistent downward trend. The lowest growth in the past 18 months was recorded in August 2024 at just 7.02%. Although growth picked up slightly in early 2025, it turned downward again from April. Senior bankers note that deposits typically rise when inflation eases. However, despite a modest decline in inflation in recent months, stagnant investment and job creation have prevented incomes from rising, curbing people’s ability to save.
Impact of Inflation on Savings
Bangladesh’s inflation edged up to 8.55% in July, breaking a three-month easing streak, driven by simultaneous hikes in both food and non-food prices, according to the Bangladesh Bureau of Statistics (BBS). Food inflation is hitting low-income groups hardest. Rice prices have remained high for over a year, and as poor households spend a large share of their income on rice, saving has become extremely difficult. Many are even breaking into their existing deposits to survive. Before the latest uptick, inflation had steadily declined – from 9.35% in March to 9.17% in April, 9.05% in May, and 8.48% in June.
Private Sector Credit Growth
Meanwhile, the central bank set a target of containing inflation within the 6.5% ceiling for FY26. According to the Bangladesh Bank data, private sector credit growth recorded a mere 6.40% in June, a level not seen in recent years. This marks the second time this year that credit growth has fallen below 7%, consistently hovering around that figure without exceeding it in any month. "The poor have virtually no capacity to save under the current circumstances," said Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank.
Currency Outside Banks
Currency outside banks continues to grow. At the end of June 2025, currency in circulation outside banks reached Tk2.96 lakh crore, marking a 2.02% year-on-year increase from Tk2.90 lakh crore. Economists say this trend is harmful to the economy as it slows down money circulation, which in turn reduces money creation. The return of this cash to banks improves their liquidity and increases the amount of loanable funds available for investment. Syed Mahbubur Rahman noted that a large portion of the cash held outside the banks is likely "illicit money," while inflation also contributes to the trend.
Conclusion
In conclusion, Bangladesh’s banking sector is facing a challenging time, with deposit growth slowing down due to inflationary pressures, sluggish private investment, and weak job creation. The growth of currency outside banks is also a concern, as it slows down money circulation and reduces money creation. The central bank’s target of containing inflation within the 6.5% ceiling for FY26 is a step in the right direction, but more needs to be done to address the underlying issues affecting the economy. The government and the central bank must work together to boost economic activity, create jobs, and increase incomes, which will help to increase savings and deposit growth.
