Bangladesh Bank has so far injected about Tk 68,245 crore into 12 crisis-hit banks under a special liquidity arrangement, effectively creating new money to keep the lenders afloat.
Central bank officials said the support became necessary as several banks faced acute cash shortages, making it difficult to honour withdrawals and maintain routine banking functions.
The funds were provided between early 2023 and February 2026, mostly as very short-term loans backed by promissory notes due to a lack of eligible collateral.
Central banks create new money when they lend to commercial banks, a process often referred to as ‘printing money’ in simpler terms, experts said.
According to central bank data, the support was extended through short-term loans against promissory notes due to the absence of eligible collateral.
Officials said that the funds were used mainly to cover shortfalls in the cash reserve ratio and current accounts that banks must maintain with the central bank to settle interbank payments and meet regulatory requirements.
Of the total amount, Tk 17,245 crore was disbursed during the tenure of former governor Abdur Rouf Talukder, while Tk 51,000 crore was provided under the immediate past governor Ahsan H Mansur.
Among the recipients, First Security Islami Bank got the highest support of Tk 15,810 crore, followed by EXIM Bank Tk 12,010 crore, Social Islami Bank Tk 10,841 crore and National Bank Tk 10,568 crore, Union Bank Tk 5,420 crore, Premier Bank Tk 5,000 crore, AB Bank Tk 4,270 crore and Global Islami Bank Tk 3,003 crore.
Smaller amounts went to Bangladesh Commerce Bank Tk 624 crore, ICB Islami Bank Tk 252 crore, Padma Bank Tk 252 crore and BASIC Bank Tk 195 crore.
Five Shariah-based banks — Social Islami Bank, First Security Islami Bank, Union Bank, Global Islami Bank and EXIM Bank — are now under a merger process to form a single entity as part of restructuring efforts.
These banks have long faced allegations of large-scale fund diversion and weak governance, which eroded depositor confidence and triggered liquidity shortages.
Central bank officials said that the emergency funding was necessary to prevent payment disruptions and restore minimum stability in the banking system.
Without such support, several banks could have failed to meet withdrawal demands or clear transactions, potentially spreading panic across the sector.
However, economists warned that repeated liquidity injections without addressing underlying problems — such as poor loan recovery, governance failures and politically influenced lending — could worsen long-term risks.
They said the policy creates moral hazard by signalling that weak banks will continue to receive support regardless of performance.
The funding also has implications for the broader economy through the money multiplier effect.
When the central bank creates new money by lending to banks, it increases base money. Commercial banks then use this liquidity to extend loans or settle obligations, which expands the overall money supply multiple times.
Bangladesh’s money multiplier — currently estimated at 5.5 — means that the initial Tk 68,245 crore injection could potentially translate into more than Tk 3.75 lakh crore in the wider financial system.
The money multiplier refers to how an initial increase in central bank money leads to a larger expansion of total money supply through bank lending and deposit creation.
Such expansion can support liquidity in the short term but also carries inflation risks if not matched by growth in production and output.
With inflation already elevated, additional liquidity may increase price pressures and weaken purchasing power.
Since December 2022, several crisis-hit banks have repeatedly taken emergency funds under the lender-of-last-resort facility, often without significant improvement in financial health.
https://www.newagebd.net/post/economy/295017/bb-injects-tk-68245cr-into-12-weak-banks