Home ›› 13 Dec 2022 ›› Front
Bank deposits across Bangladesh – excluding the Dhaka Division – have dropped in the July-September period of 2022, when compared to the same year’s April-June period, a phenomenon never seen in recent years.
Experts blamed the steady dip in deposits on a multitude of factors, specifically inflation, lack of trust on the banking industry due to irregularities, soaring living costs, shrinking income and impacts of the ongoing economic crisis.
The Business Post has analysed the Scheduled Banks Statistics report published by the Bangladesh bank on Monday, and compared the figures of Q3 with Q2 this year.
Deposits in Chattogram have decreased by Tk 5,211 crore, Khulna by Tk 1,756 crore, Mymensingh by Tk 78 crore, Rajshahi by Tk 550 crore, Barishal by Tk 800 crore, Sylhet by Tk 256 crore and Rangpur by 750 crores.
Meanwhile, the deposits in Dhaka have increased by Tk 11,949 crore. Riding on the deposit growth in Dhaka division, total deposits in the banking sector slightly rose by Tk 2,547 crore or 0.16 per cent to reach Tk 15.76 lakh crore in Q3.
Speaking to The Business Post, Executive Director of Policy Research Institute (PRI) Ahsan H Mansur said, “There are big corporations in Dhaka, and there was no tendency among them to withdraw their deposits.
“This is why the bank deposits in Dhaka did not decrease. However, the opposite has happened outside the Dhaka division, as there are more general customers there.”
He continued, “The historical trend is that bank deposits increase every quarter. However, since the second quarter of this year, the cost of living has increased due to the rising inflation. So people are keeping more cash on hand than ever before.
“As a result, on the one hand customers outside Dhaka could not make new deposits, and on another, many withdrew their deposits. Besides, effects of the lack of confidence in the banking sector were more prevalent in regions outside the Dhaka division.”
A former president of Association of Bankers, Bangladesh (ABB), Anis A Khan said, “Money is increasing in the informal market. For example, the shopkeeper is no longer depositing part of his income in the bank at the end of the day or at the end of the month.
“It looks like recent concerns centring the banking industry may have been a factor as well, as are usually more worries in regions outside the Dhaka division.”
Voicing a different opinion, Managing Director and CEO of the Mutual Trust Bank Syed Mahbubur Rahman said, “The key reason behind the dip in deposits is actually the inflationary pressure.
“The gross income in the Dhaka division is higher compared to other divisions in the country. This is why the inflation impact was low in Dhaka division, but was high in other divisions.”
How inflation affected deposits
Last August, fuel prices doubled in one jump. As a result of the Russia-Ukraine war that started in February this year, both the cost of imports and the prices of goods in Bangladesh skyrocketed. The inflation continues to rise.
According to the Bangladesh Bureau of Statistics (BBS), the inflation was 7.48 per cent in July 2022, which then rose to 9.52 per cent in August – highest in the decade. Later, it fell slightly to 9.10 per cent in September.
The amount of cash in hand of the people to meet the cost of living also increased under the pressure of inflation.
According to the central bank data, the amount of currency in the hands of people at the end of June was Tk 2.36 lakh crore. At the end of October, it exceeded Tk 2.56 lakh crore.
Deposit growth was around 4 per cent in the June quarter, which later fell to 0.16 per cent in September, according to the Scheduled Banks Statistics report. As the deposits did not increase as expected, it triggered a liquidity crunch in the banking sector. At the end of September this year, excess liquidity in the banks was Tk 1.70 lakh crore, which was Tk 2.19 lakh crore in September last year. So the excess liquidity has decreased by about Tk 50,000 crores in one year. The inter-bank interest rate, also known as the call money rate, rose to 5.5 per cent in September this year as excess liquidity declined. At the end of June, this rate was 4.5 per cent.
