Banks halt new note distribution as interim government grapples with financial headwinds.
Key Takeaways:
i) Banks in Bangladesh have stopped circulating new currency notes, leading to a shortage in the market and public inconvenience.
ii) This halt is reportedly due to the presence of the image of Bangabandhu Sheikh Mujibur Rahman on all new notes and coins.
iii) The central bank had instructed banks to reserve new notes and conduct transactions using re-circulated ones, causing a glut of old, worn-out notes in circulation and at ATMs.
Money Matters Monitoring – Bangladesh is currently navigating a significant economic crisis under the interim leadership of Muhammad Yunus, a situation exacerbated by a disruption in the circulation of new currency notes. According to local media reports, banks across the nation are unable to distribute fresh banknotes to meet public demand.
The unusual halt in the flow of new currency is reportedly linked to the design of the notes themselves. All denominations of new Bangladeshi Taka banknotes and coins feature the image of Bangabandhu Sheikh Mujibur Rahman, the country’s founding father. Sources suggest that this has led to the central bank instructing all scheduled banks to cease the exchange of new notes for the public.
An estimated 15,000 crore Bangladeshi Taka worth of paper notes, all bearing the image of Sheikh Mujibur Rahman, are currently sitting idle in bank vaults.
A directive issued by the Bangladesh Bank instructed branches holding fresh currency to refrain from releasing them and instead maintain them in reserve. Banks were further advised to conduct all cash transactions using banknotes that were already in circulation. This policy has effectively stopped the distribution of new notes, resulting in a noticeable scarcity in the market.
Consequently, citizens are facing difficulties as they lack access to crisp, new currency. Shops and banking institutions are reportedly overwhelmed with worn, old, and often dirty banknotes. Adding to the public’s woes, ATM booths have also begun dispensing these less-than-ideal notes. One Dhaka resident recounted withdrawing 20,000 Taka from an ATM, only to find three of the 1,000 Taka notes in an almost unusable condition.
Reports indicate that the central bank’s directive has also resulted in a substantial financial loss for the institution. An estimated 15,000 crore Bangladeshi Taka worth of paper notes, all bearing the image of Sheikh Mujibur Rahman, are currently sitting idle in bank vaults.
Several bank officials, speaking to local media, have expressed concerns that this sudden cessation of new note circulation has created an unnecessary crisis within the market. They argue that the printed money is essentially being wasted while causing increased hardship for customers.
This currency circulation issue compounds the broader economic challenges facing Bangladesh. Recent reports from international financial institutions, such as the Asian Development Bank and the World Bank, indicate a slowdown in Bangladesh’s GDP growth for the current fiscal year, alongside concerns about rising inflation and potential increases in poverty. The interim government is under pressure to stabilize the economy and restore confidence.
The situation with the currency notes adds a layer of complexity to these efforts, impacting daily transactions and public sentiment during a period of economic uncertainty.
