Badrul Ahsan :
Interest cuts on fixed deposits by the banks are driving depositors towards the non-banking financial institutions (NBFIs) that are offering relatively higher rates on deposits.
Money market experts attributed such switching of sides by depositors from the banking system to NBFIs only due to a sharp gap between the interest rates.
The savers sprees towards the NBFIs include both individuals and corporate houses, they said.
Following the recurrent downward trend of interest rates, the scheduled banks offer 7.25-8.0 per cent on term deposits. In comparison, savers get upto 11 per cent of interest on time deposits with the country’s 30 NBFIs.
The lowering of rates on term deposits is believed due to adequate liquidity with the banks.
Bangladesh Bank (BB) statistics available with the department of financial institutions and market show the deposits with the NBFIs having made a quantum leap to Tk 312.61 billion
at the end of January 31 in the current financial year (FY2015-16).
This rise in (term) deposits, with varying maturity of 1 month to 12 months or more, has surged more than 37 per cent in the first seven months comparing with the corresponding period of the last fiscal year.
“Both individuals and corporate houses are rushing in for deposits with the NBFIs,” a General Manager of Islamic Finance and Investment Limited told The New Nation Thursday preferring anonymity.
“The leading corporate houses earlier did not show interest about us-they are now increasingly coming in our office to keep their deposits with us,” he said.
By a contrast, top executives at the banks said, the scope of investment in banking field has squeezed and this is forcing people to deposit their money with the NBFIs.
Md Nurul Amin, chief executive at Meghna Bank, said the time deposits with the bank dropped as it is reluctant to receive deposits with previous rate due to the availability of adequate liquidity with them.
“The earnings from capital market and the yields from national savings schemes have also declined, which lured people into going to the NBFIs,” he said .
“I think the main reason behind the diversion of funds from the banks to the NBFIs is the difference between the rates of interest,” Nurul Amin said.
However, money market experts said slow investment growth led to the snowballing of idle money with the banks.
They said making deposit with the NBFIs is somewhat ‘risky’ but people enjoy the financial gains, for the time being, much higher than the banks offer.
“Although no NBFIs so far collapsed, but the NBFIs’ financial footing is not so strong as the banks,” former advisor to the caretaker government, Dr. Mirza Azizul Islam, said.
He pointed out that NBFIs depend on banks. As the deposits made by people with the NBFIs, so their footing is not strong, he said. However, wealth managers said this sharp difference in interest rates between the banks and NBFIs could be a temporary phenomenon-it may change when investment picks up.
Interest cuts on fixed deposits by the banks are driving depositors towards the non-banking financial institutions (NBFIs) that are offering relatively higher rates on deposits.
Money market experts attributed such switching of sides by depositors from the banking system to NBFIs only due to a sharp gap between the interest rates.
The savers sprees towards the NBFIs include both individuals and corporate houses, they said.
Following the recurrent downward trend of interest rates, the scheduled banks offer 7.25-8.0 per cent on term deposits. In comparison, savers get upto 11 per cent of interest on time deposits with the country’s 30 NBFIs.
The lowering of rates on term deposits is believed due to adequate liquidity with the banks.
Bangladesh Bank (BB) statistics available with the department of financial institutions and market show the deposits with the NBFIs having made a quantum leap to Tk 312.61 billion
at the end of January 31 in the current financial year (FY2015-16).
This rise in (term) deposits, with varying maturity of 1 month to 12 months or more, has surged more than 37 per cent in the first seven months comparing with the corresponding period of the last fiscal year.
“Both individuals and corporate houses are rushing in for deposits with the NBFIs,” a General Manager of Islamic Finance and Investment Limited told The New Nation Thursday preferring anonymity.
“The leading corporate houses earlier did not show interest about us-they are now increasingly coming in our office to keep their deposits with us,” he said.
By a contrast, top executives at the banks said, the scope of investment in banking field has squeezed and this is forcing people to deposit their money with the NBFIs.
Md Nurul Amin, chief executive at Meghna Bank, said the time deposits with the bank dropped as it is reluctant to receive deposits with previous rate due to the availability of adequate liquidity with them.
“The earnings from capital market and the yields from national savings schemes have also declined, which lured people into going to the NBFIs,” he said .
“I think the main reason behind the diversion of funds from the banks to the NBFIs is the difference between the rates of interest,” Nurul Amin said.
However, money market experts said slow investment growth led to the snowballing of idle money with the banks.
They said making deposit with the NBFIs is somewhat ‘risky’ but people enjoy the financial gains, for the time being, much higher than the banks offer.
“Although no NBFIs so far collapsed, but the NBFIs’ financial footing is not so strong as the banks,” former advisor to the caretaker government, Dr. Mirza Azizul Islam, said.
He pointed out that NBFIs depend on banks. As the deposits made by people with the NBFIs, so their footing is not strong, he said. However, wealth managers said this sharp difference in interest rates between the banks and NBFIs could be a temporary phenomenon-it may change when investment picks up.
