MP Khokon proposes demonetising Tk1,000 and Tk500 notes to bring cash into banking system

BNP lawmaker Barrister Mahbub Uddin Khokon has proposed demonetising Tk1,000 and Tk500 notes to bring undisclosed cash back into the banking system, curb money laundering and reduce the flow of black money.

Speaking during the general discussion on the budget in parliament today (28 June), Khokon said a significant amount of cash is being kept outside the banking system, including money allegedly left behind by people who have fled the country.

He suggested setting a one- to two-month deadline for depositing Tk1,000 and Tk500 notes into banks, arguing that such a move would channel large amounts of cash back into the formal financial system.

Khokon said individuals unable to show a legal source of income could be allowed to legalise their money by paying tax at a specific rate of 20% to 25%.

According to him, this would increase liquidity in banks, boost investment and improve the flow of money in the economy.

The MP also called for reducing the number of banks in the country, saying Bangladesh has more banks than necessary.

"Just because someone becomes an MP they need [their own] bank, just because someone becomes a leader they need [their own] leasing company – this culture must be stopped," he said.

"There is no need for so many banks. Weak banks are being kept alive with the public's money."

He said the banking sector would become more effective if the number of banks was reduced.

Raising the issue of money laundering, Khokon said successive governments have spoken about recovering laundered money since independence, but little progress has been made.

According to him, money is transferred abroad because people do not feel confident keeping it in the country.

He said efforts should focus on creating a financial and legal environment that encourages people to retain their assets in Bangladesh.

Khokon also said the budget had been prepared amid a challenging economic situation.

He welcomed provisions for social safety net programmes, family cards, farmer cards, and youth training and employment initiatives.

However, he stressed that creating jobs should be given the highest priority to help improve the law and order situation.

The MP's proposal drew comparisons with India's 2016 demonetisation initiative, under which the legal tender status of 500 and 1,000 rupee notes was withdrawn.

The move had resulted in large amounts of cash being deposited in banks and contributed to increased liquidity, digital payments and tax registrations.

However, the effectiveness of the measure remains debated, with economists questioning its impact on recovering black money and citing its adverse effects on small businesses, the informal sector and ordinary people.