Banks in the country saw a rapid surge of funds in certain accounts last year after the government gave the scope for legalising black money.

Funds in the accounts with deposits of Tk 1 crore and above each stood at Tk 364,466 crore last year, up by 18 percent year-on-year, shows Bangladesh Bank data.

In 2019, the deposit growth in such accounts was 7 percent. It was 13 percent in 2018.

The number of these accounts also rose to 71,346 last year from 62,710 in 2019.

The Daily Star talked to a number of bankers, tax officials and analysts, who pointed out that there is a strong link between the deposit growth and the opportunity given to whiten black money.

They also referred to the reduced scope for laundering money abroad amid the Covid-19 pandemic and also cap on investment in national savings certificates.

In the current fiscal year, the government gave the opportunity to whiten black money by declaring undisclosed wealth and income in tax returns upon payment of only 10 percent tax on the undisclosed amount without any questions about the sources of income.

The provision drew criticism and opposition from various sections of the society as it encourages corruption and non-compliance with the rules.

It, however, prompted more than 10,000 individuals to disclose their ill-gotten wealth in this fiscal year.

They legalised a record amount of assets worth Tk 14,295 crore in the first nine months of this fiscal year by showing their wealth in the form of cash, fixed deposit receipts (FDRs), saving certificates and shares. The National Board of Revenue got Tk 1,439 crore in taxes, said tax officials.

Bankers and analysts see a correlation between the whitening of black money and the rise in funds in the accounts with deposits of Tk 1 crore and above each.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank Ltd (MTBL), said the provision for legalising undeclared income might have led to the increase in deposits in such bank accounts.

Md Abdus Salam Azad, MD of Janata Bank Ltd, and Abul Kashem Md Shirin, MD of Dutch-Bangla Bank Ltd (DBBL), echoed Mahbubur's views.

Deposits in the accounts with Tk 1 crore and above each rose to a large extent in the second half of last year.

Between July and December last year, Tk 43,657 crore was deposited with such accounts, up by 330 percent from Tk 10,248 crore during the same period in 2019.

The overall deposit in the banking sector stood at Tk 13,79,250 crore as of December last year, up by 13 percent year-on-year. The deposit growth was 12 percent in 2019 and 10 percent in 2018.

This gives a clear indication that the deposit growth in such accounts last year was faster than the overall deposit growth in the banking sector.

Muhammad Abdul Mazid, ex-secretary and former chairman of the NBR, said a vested quarter had put huge pressure on the government to give the scope for legalising undisclosed wealth.

"Black money never brings anything good for the economy. They [holders of black money] usually buy land or shares in the capital market."

Whitening of undisclosed wealth pushes up prices of shares and land in tandem, and this creates troubles for commoners in investing in these sectors, he mentioned.

A good number of delinquent individuals usually deposited their funds with banks in the name of their relatives. Now, they are transferring those funds to their own bank accounts, causing a surge in deposits in the accounts with Tk 1 crore and above each, Mazid said.

With the injection of undisclosed money into banks, the banking sector had excess liquidity of Tk 198,000 crore till March this year, according to BB data.

"An individual may have to pay as high as 25 percent income tax a year, but the vested quarters are legalising their illegal money by paying only 10 percent tax."

Mazid pointed out that the government measure has encouraged corruption, creating a disorder in the entire financial sector.

Nasiruddin Ahmed, another ex-chairman of the NBR, said that if the government rolled out automation on a massive scale ranging from the banking sector to the NBR, it would not have needed the provision for legalising undisclosed money.

Automation helps curb corruption and tax evasion simultaneously, he noted.

A section of the businesspeople, who hold key positions in the government, persuaded it to keep the provision to fulfil vested interests, he said.

Since undisclosed money is not legally earned, the government measure for whitening it should not be supported under any circumstances, he noted.

However, Manirul Huda, president of the Bangladesh Tax Lawyers' Association, is in favour of the scope for legalising untaxed money.

"The initiative has helped the government bring back money to the mainstream."

People from the upper middle-class usually invest their whitened money in the real estate sector while the ultra-rich people keep it in banks or invest in the capital market.

OTHER REASONS

Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh, said lockdown and restrictions imposed by different countries to curb the spread of Covid-19 have created roadblocks to siphoning off money.

These have largely barred the delinquent persons from travelling abroad, thwarting their efforts to launder money, he pointed out.

For example, if individuals intend to buy houses in developed countries, they usually visit those. But they have been unable to do so for over a year due to the pandemic, and have to deposit their money with banks, Ahsan said.

Ex-NBR chairman Mazid said delinquent individuals usually launder money to certain countries, including Canada and Malaysia, to have a second home there. But the ongoing Covid-induced restrictions have made it difficult for them to do so.

MD of MTBL Mahbubur said that for the ultra-rich people, travel ban by many foreign countries amid the pandemic has greatly narrowed the room for expenditure.

They are now unable to go abroad for enjoying holidays or getting medical treatment, he said.

MD of DBBL Kashem pointed out that a section of people opted to deposit money with banks after the government imposed a cap on savings tools.

One cannot invest more than Tk 50 lakh in three savings instruments: the five-year savings certificate, the three-month profit-bearing savings certificate, and the family savings certificate.

Under joint names, a maximum of Tk 1 crore can be invested in the three instruments.