People are depositing more in their savings account as they see fewer options for investment. As a result, banks have received over Tk1,512,400 crore in deposits in 2021 alone.
According to Bangladesh Bank’s latest data, it is up by 10% year on year.
Economists related this with limited investment options and a lack of confidence in the non-banking financial institution (NBFI) sector. In this case, they suggest that a stable capital market may be an alternative place for investors to invest.
“People deposit their savings in the banks, although interest rates have been cut down, which signifies that they, especially the middle-class, have little alternative to put their money in,” said AB Mirza Azizul Islam, economist and former financial adviser to a caretaker government.
“On the other hand, the NBFI sector has been facing a crisis due to a wide range of corruption in five to seven financial organizations. The crisis arose in the last two years and I think it is starting to have an impact on the whole sector," he added.
“In the last year, there were two lockdowns. The first half of the year witnessed poor transactions, but after the second lockdown and during the second half, it was fantastic," he explained.
The data prepared by the central bank shows the overall performance of the banking sector.
The number of accounts, mainly consisting of current, savings and fixed deposits, also grew nearly 8% to 151.25 million in the year under review.
However, the number of fixed-deposit accounts dropped by 73,685 accounts in 2021.
But the number of deposits under time or fixed deposit category grew nearly 9% to Tk674,807 crore. FDR or Fixed Deposit Receipt is the biggest component in the banking sector, grabbing around 44% of total deposits.
The volume of savings, the biggest one in terms of accounts in the banking sector, stood at Tk338,992 crore at the end of December of 2021. The total number of savings accounts stood at 101.95 million at the end of December, up 8.68% over 2020.
The number of current accounts surged to 6.88 million, up by more than half a million or 5,02,158 accounts.
The amount of money in the current accounts stood at Tk137,295 crore, 14.8% up compared to the end of December 2020.
Former lead economist of the World Bank’s Dhaka office Zahid Hussain told Dhaka Tribune: “Due to a wide range of corruption, the NBFI sector has been facing a crisis. So, people still have confidence in the banking sector. But there is room for improving the governance, especially in the state-owned banks.”
“The non-performing loans and other issues should also be addressed. Otherwise, the banking sector will not attract such deposits in the future. In that context, a stable capital market may be an alternative place for investors to invest,” he added.
According to Bangladesh Bank, the deposit rate in the NBFI sector is still high. The average deposit rate in the NBFI sector was 7.62% in December 2021, where the banks have taken deposits at an average interest of only 3.99%.
