Bank deposits in Bangladesh crossed Tk1,700,000 crore for the first time in May, driven by rising interest rates in the financial market.
According to Bangladesh Bank data, deposits increased by 8.77% to Tk1,700,608 crore in May, excluding inter-bank and government deposits, compared with that of Tk1,563,499 crore in the same month of the previous year.
Of the total deposits at the end of May, Tk1,513,000 crore was time deposits and Tk186,000 crore was demand deposits.
The growth in deposits followed the central bank’s decision to lift the 9% lending rate and 6% deposit rate caps in July 2023.
On May 8, the Bangladesh Bank introduced a market-based approach for determining lending rates, resulting in lending rates rising to 14%-17% and pushing deposit rates higher.
Bankers said that higher interest earnings added to clients’ deposits, thereby increasing the total deposit volume in banks.
However, the deposit growth has recently slowed due to rising inflation, a contractionary monetary policy and high currency outside banks, they said.
Deposit growth was 14.43% in May 2021, 11.35% in May 2020 and over 10% in May 2019.
Bankers said that deposit growth rate in banks declined due to inflationary pressures in the country as people required withdrawing their funds to meet their daily expenses.
According to Bangladesh Bureau of Statistics data, the overall inflation rose to 9.89% in May, the highest since October 2023, when it hit 9.93%.
Inflation has remained near 10% since March 2023.
Currency in circulation soared to Tk270,000 crore in May from Tk255,000 crore in May 2023.
The average deposit rate in banks was 5.3% and the average lending rate was 10.53% in April.
Amid a dollar crisis, the Bangladesh Bank sold $34 billion to banks in the past three years, which eventually mopped up a huge amount of local currency from the financial sector.
The interbank currency rate was Tk118, which was Tk84.8 in August 2021.