The volume of currency outside the banking sector of Bangladesh has been increasing since November amid higher inflation and the erosion of confidence among people in some banks.

In January, the currency outside banks totalled Tk 2,57,295 crore, up from Tk 2,54,860 crore a month ago, data from the Bangladesh Bank showed.

The volume has been rising since November 2023 when it stood at Tk 2,48,441 crore. It was Tk 2,91,913 crore in June last year, the highest in recent times.

The currency outside banks, however, fell 2.16 percent year-on-year in January.

Bankers attributed the January 7 national election for the spike in the cash among the public. Persisting inflationary pressure and trust deficit among depositors also contributed to the rise.

In January, broad money, which refers to the amount of funds circulating in the economy, was Tk 19,02,880 crore. Of the volume, Tk 257,295 crore were outside the banking sector and the remaining Tk 16,45,585 crore was deposited in the banking system, BB data showed.

Of the Tk 16,45,585 crore, some Tk 1,86,273 crore was demand deposits and Tk 14,59,311 crore was time deposits.

Mati Ul Hasan, additional managing director of Mercantile Bank, says various reasons are behind the trend.

"Many people are concerned about their deposits since a few banks are struggling due to loan irregularities and scams. So, some of them are withdrawing funds from banks and are keeping them under their disposal."

"High consumer prices have also forced people to dip into their savings since their cost of living has gone up, he said."

Inflation in Bangladesh has remained above 9 percent since March last year.

Central bankers think the currency outside banks would fall in the upcoming months because banks are offering higher interest rates to collect deposits.

"The currency outside banks increased in November to December due to the political uncertainty. There is no such uncertainty in the economy now," said one official of the BB.