Bank deposits have started to increase in Bangladesh as the people who had withdrawn money from the banks have started returning it in the last three months.
Several officials have said that most of the banks in Bangladesh are starting to see the growth in deposits, and the month of February saw the most increase compared to November and December last year and January this year.
According to data from Bangladesh Bank, deposits in the banking sector increased by Tk2,281 crore last December, while in November bank deposits were Tk1,486,888 crore.
In December, deposits increased to Tk1,489,169 crore. However, compared to October, deposits decreased by Tk3,155 crore in November. Meanwhile, last October, the amount of deposits in the banking sector was Tk1,490,430 crore.
Bangladesh Bank has lifted the deposit interest rate limit which was fixed at 6% on January 15 this year. Besides, banks were given the opportunity to increase the interest rate up to 3% in case of customer loans.
The new interest rate has benefited the banks as customers have started to deposit money in banks again.
In this regard, Bangladesh Bank officials said that if the interest rate on loans increases, the interest rate on deposits increases. And if the deposit interest rate increases, depositors who depend on interest income increase in number.
In the monetary policy announced for the last six months of the financial year 2022-23, Bangladesh Bank lifted the fixed interest rate on bank deposits. According to the policy, the minimum interest rate on deposits has been completely withdrawn due to the current market conditions.
In addition, the new monetary policy also announced an increase in consumer loan interest rates.
Bangladesh Bank officials said that the interest rate can be increased up to 3% in the case of consumer loans. That means the banks can increase the interest rate of consumer loans up to 12%.
Officials said due to the recent high inflation across Bangladesh, citizens' saving capacity has already been reduced, as thousands started to run their families by withdrawing their deposited money from banks.
Besides, reports on various irregularities in the banking sector also made people feel safer in withdrawing money.
To avoid such incidents, banks started to increase their deposit interest rate. Some banks are offering up to 8% interest on deposits while maintaining the maximum interest rate limit of 9% on loans.
According to directives, a bank has to inform Bangladesh Bank every month on how much interest it is taking on deposits.
If the banks decide to increase or decrease their interest rate, they have to inform consumers about it on their websites.
In April 2020, Bangladesh Bank fixed the loan interest rate at 9% and the deposit interest rate at 6%.
Meanwhile, according to Bangladesh Bank, Padma Bank has started to take deposits at 8% interest in January.
South Bangla Agriculture and Commerce Bank Limited was offering up to 8% interest on term deposits, while the highest 7.5% was recorded in the previous month.
Meanwhile, Exim Bank posted a profit margin of 7.5% in January, while the highest was recorded at 7% in the previous month.
Additionally, AB Bank announced a 7.25% interest rate on term deposits in January, while the bank's previous month's rate was 6.75%.
Al-Arafah Islami Bank's interest rate increased from 5.75% to 6.25%. Rupali Bank, which took fixed deposits at 6.5% interest last December, is now offering 7% interest rate.
Janata Bank also offers term deposits at 7% interest. Till November, the bank's highest interest rate on deposits was 6.75%. Bangladesh Krishi Bank has made the interest rate on deposits 7%.
However, data from last year's December quarter shows that deposit growth in the banking sector was slowing down.
According to data from Bangladesh Bank, the average interest rate of deposits was 4.23% last December, while a year ago it was 3.99%.
The data from the bank said that despite the rise in interest rates, deposit growth has fallen to the lowest level.
Deposits increased by 5.44% to Tk1,640,689 crore in the one year till last December. However, debt increased by 13.8% in one year and at the end of December, the balance stood at Tk1,403,597 crore.
In this regard, the managing directors of several private banks said that there is a money crisis in the banks and there was no other way of growing it without increasing interest.
According to Bangladesh Bank data, the annual deposit growth in February 2020 was 12.82%. Until May 2021, the growth of deposits reached 14.47%. In December last year, the annual growth of deposits stood at 5.66%, which was the lowest growth in history. Before this, in April 2018, the annual growth of bank deposits fell to 5.98%.
A review of the data shows that last year saw the lowest increase in deposits. In the year 2020, deposits in the bank sector increased by Tk153,492 crore. The annual growth was 13.5%.
In 2021, deposits increased by Tk118,870 crores or 9.21%, and in 2022 it increased by Tk79,826 crore taka or 5.66%.
Bangladesh Association of Banks (BAB) Chairman Nazrul Islam Mazumder said those who had withdrawn money have started depositing money in the bank again.
Due to much misinformation, many people had withdrawn money when they saw the banks give the money immediately after receiving cheques.
He mentioned that people have started gaining confidence in banks again. Besides, they have also realized the risk of keeping money at home. Because of this, deposits in the bank sector are increasing.
