Depositors seek protection not higher return from banks: study

People do not take interest rate into account while keeping their deposits with banks, rather they seek protection for their investment, study finds.

State-owned banks are still considered as the safest to the depositors followed by foreign banks among the different bank groups, according to a study on the perception and behaviour of the depositors in the banking sector.

Bangladesh Institution of Bank Management (BIBM) released the report yesterday at a function held at BIBM auditorium in the capital.

Twenty seven percent of the depositors switch from one bank to another for higher interest rates, according to the survey. In terms of perceived safety, 39 percent preferred government banks while 34 percent foreign and 27 percent private commercial banks.

Though, the market share in deposits by state owned banks shows different scenario.

State banks have 27.85 percent share in total deposits while foreign banks have only 4.25 percent. Private commercial banks have the highest 65.15 percent shares in total deposits, Bangladesh Bank data shows.

Private commercial banks offer the best quality services, according to 52 percent of the depositors.

Safety is the matter of concern for the conscious depositors, said Yasin Ali, professor of BIBM. “That's why they prefer state owned banks and foreign banks. But what factors attract depositors to switch the bank should have a detail study.”

The deposit as percentage of GDP has increased to 46.79 percent in 2014-15 from 10.24 percent in 1975-76, the report said. The credit-GDP ratio increased to 48.24 percent in 2014-15 from 12.15 percent in 1975-76.

The survey was conducted to find out the motives for keeping deposits in banks, examine the level of awareness about the safeguards or regulatory measures that exist in favour of the depositors.

About 91 percent of the respondent opined that their propensity to deposit has increased after opening account in banks.

The report finds that 11 percent of the depositors have taken loans against deposits. Purchase of land and flat is the main reason for long-term savings, the report said.  “It is evident from the study that the level of financial literacy of depositors in Bangladesh is significantly low and the depositors do not use the available information for selecting banks and making financial decisions,” the report said.

BIBM released 10 research papers yesterday at the function attended by Abu Hena Mohd Razee Hassan, deputy governor of Bangladesh Bank, and Khondkar Ibrahim Khaled, former deputy governor.