Banks' deposits soar despite small returns
Banks' deposits grew by a handsome amount last fiscal year despite small returns further pared down by inflation.
Deposits grew 14.05 percent to Tk 858,331 crore in the year to June 30, whereas the weighted average interest rate on deposits fell about 1.24 percent during the period.
The interest rate was only 5.54 percent in June, whereas inflation then was below 6 percent.
This means, if inflation is taken into account, the savers are not getting any returns against their deposits.
People have been depositing their money with banks as they do not have any better schemes to park their funds in, said a central bank official.
“Those who live abroad have the option of investing their savings in the stockmarket. Here, after the two crashes, people have lost their confidence in stocks,” he added.
Over the last fiscal year, deposits with the state-owned commercial banks grew 16.36 percent, private banks 13.76 percent and foreign banks 8.19 percent, according to central bank statistics.
The state banks in recent times have lowered the rate of interest on deposits much and yet the rate of deposit with state banks soared 18 percent to 24 percent.
The interest rate on the saving deposits of state banks stood at 3 percent to 4 percent and that on fixed deposit 6 percent, which is the highest.
A year earlier, the rate was 4 percent to 7.25 percent for savings and 9 percent for on fixed deposits.
One of the reasons for the increase in deposits of state banks is the high confidence the ordinary people have in the institutions, said Zaid Bakht, chairman of Agrani Bank.
Savers think that there is no possibility of the state banks shuttering, so it is safe to deposit money with them even though the returns are less, said Pradip Kumar Dutta, former managing director of Sonali Bank.
Another reason for the state banks' bulging deposits is that the money of various government projects is kept with them, according to Bakht.
Many bank officials said 75 percent of the deposits of various government institutions have to be kept in state banks -- the reason for the increase in deposits of state banks.
The rate of interest that many private banks are offering on savings is about 2 percent, while that on fixed deposits is 5 percent to 7 percent.
However, many private banks' deposit increased significantly. The deposits of old private banks soared up to 30 percent and that of new ones 30-53 percent.
The new private banks' base was low, due to which their growth is shown higher.
The new private banks have been offering high rates for some selective deposits, which brought about the high growth.
Many businessmen and industrialists have been unable to invest their money for various reasons and the money has been kept idle in their deposit accounts with the banks, officials said.
Bank officials said people's income has been increasing and every year a large amount of remittance is flowing into Bangladesh. “For these reasons, the deposit has increased in banks.”
However, the rate of interest to depositors is the lowest in foreign banks.
The foreign banks' interest rate on weighted average is only 1.8 percent. Despite that, their deposit grew 8 percent on average, with one bank seeing it rise as high as 18 percent.
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