Kazi Zahidul Hasan :
Deposit in banks continues to increase despite cut in the interest rates on fixed deposit.
Bangladesh Bank (BB) has reported a 13.1 per cent increase in bank deposit at the end of December last year when the total amount in deposits stood at Tk 9.08 lakh crore.
The amount was Tk 8.03 lakh crore in 2015.
Bankers said, deposit has increased despite poor interest on fixed deposit because people have no alternative, but to hold their cash in banks for safety.
Banks were generally offering in the range of 4.5-5.22 per cent interest on term deposits last year. The average interest was 12 per cent in June 2013 and it came down to 8.61 per cent by the end of the year.
The rate steadily fell down in between the year 2014 and 2015 and drooped further throughout 2016 reaching 5.22 per cent on an average. “Deposits at the banks continue to rise, but their growth remained stagnant over the last two years,” Anis A Khan, President, Association of Bankers Bangladesh told The New Nation on Saturday.
He said, “The main reason for stagnant deposit growth is poor returns to depositors. It encourages potential depositors to put their money in the government’s saving schemes or spend instead of allowing it to devalue by putting into banks.
Commenting on the issue of falling interest rates on deposit, Anis A khan said, “Demand and supply determine interest rate. The demands for liquid funds in banks have almost dried following their huge accumulation of idle funds. So, they may not go for mobilizing costly deposit right now.
“Despite the fact, people are keeping their money at banks mainly due to safety and security of their cash,” he added.
Bankers, however, stated that banks continue to pursue cheaper deposits, that is current and savings accounts, in order to increase their net interest income from lending business.
“We are getting cheaper source of funding, but offering credit to enterprises at higher rate of interest. This is helping the banks to earn more from interest income,” a senior executive of a private bank told The New Nation yesterday.
“The interest rates on fixed deposit remain depressed due to poor credit growth to the private sector,” he said.
Private sector credit growth stood at 16 per cent as in December last year.
The average lending rate came down to 9.93 per cent during the period under review. But the rate was as high as 14 per cent for consumer credits and some other sectors paving the way for brisk interest income by banks, sources said.
