Bangladesh spends Tk 200b yearly on cash management

Bangladesh has to pay a penalty for overlooking digital finance as it spends approximately Tk 200 billion annually on cash management for a lack of a robust cashless infrastructure, policy framework, digital literacy and adoption.

The costs include management of idle cash, currency sorters, operations at the state-owned mint (Takshal), and expenses for security personnel.

Bangladesh Bank Governor Dr Ahsan Mansur disclosed the staggering figure of avoidable costs at a recent monetary -policy discussion with economists, bankers and major stakeholders at a hotel in Dhaka.

He stressed the urgency for the country to transition toward a cashless economy to help curb the informal sector--an oft-reported underground or unaccounted-for economy deemed bigger than the country's economy proper.

"We must escalate the credit -card limit to make its use comfortable to encourage digital-payment systems," the economist-turned chief of the central bank said.

He also notes that the National Board of Revenue (NBR) has withdrawn the mandatory tax-return -submission requirement for credit-card-holders with the aim of easing digital-financial inclusion.

Dr Mansur emphasized expanding the coverage of Mobile Financial Services (MFS) to support a cashless transition, lamenting that most of the services are not vibrant and active to encourage clients.

A senior official from the central bank reveals that printing a 1000-taka note costs around Tk 5-6.

Additionally, about 13 per cent of the country's total banknotes are reprinted every year to replace torn and damaged ones.

However, the official acknowledges that a completely cashless economy is currently unrealistic due to the prevailing economic structure.

"It may not be entirely 'cashless'-but we must aim for a 'less-cash' society," he says about the doable for now.

Talking to The Financial Express Saturday, Professor Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue (CPD), focused on the critical need to enhance cybersecurity and digital protections alongside the push for a cashless society.

"A cashless economy not only ensures greater transparency and security, but also improves revenue collection by addressing the informal economy-one of the key reasons behind our poor tax-to-GDP ratio," he said.

Dr Masrur Reaz, the founder of Policy Exchange Bangladesh, argues for introducing regulatory incentives to discourage excessive cash usage in specific transactions.

"We are far behind countries like India and Thailand in terms of digital transactions," he says.

"This transition must be gradual. We need the right policies, enabling regulations, payment-based digital products, strong infrastructure, financial literacy, and regulatory incentives to ensure a smooth shift."

Naser Ezaz Bijoy, CEO of Standard Chartered Bank Bangladesh, mentions that the SCB is fully aligned with Bangladesh Bank's initiative to reduce cash usage in the financial system, recognizing the substantial inefficiencies and avoidable costs associated with cash management.

“Beyond the direct costs of note printing, transportation, security, insurance, storage, teller services, and sorting infrastructure-borne by both the central bank and the 61 commercial banks-the broader economic cost is even more significant,” he added.

With approximately BDT 3 trillion of cash in circulation, a portion of these large balances are sitting idle across 35,000 branches, sub-branches, and agent banking outlets, he said.

When factoring in the opportunity cost-estimated at 8-10% annually-the cumulative cost to the economy becomes staggering.

Moreover, excessive reliance on cash hampers transparency and traceability, often facilitating tax evasion, corruption, and even funding of illicit activities. At Standard Chartered, “we have proactively implemented measures to discourage high-value cash transactions, requiring supporting documentation for any cash deposits or withdrawals exceeding BDT 500,000.” “Additionally, we have incentivised the adoption of digital channels, including our mobile app, which has led to a significant reduction in transaction monitoring alerts-demonstrating both improved compliance and client behaviour.”

Banking-sector insiders have said cash management remains expensive due to widespread ATM networks, cash-centric transactions, and a large informal sector.

The cost includes cash-in-transit security, ATM replenishment, and fraud prevention.

However, recent measures, such as reducing ATM points, placing thresholds on large withdrawals, and increasing transaction monitoring, are helping bankers to cut expenses and reduce risk.

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