CONTINUED blockade and economic downturn have left banks with excess cash, as people are not showing up to put money in risky investments. Consequently banks have lowered interest on deposit but this in turn has encourage people to move out money to saving certificates schemes of the government which gives higher rates to lure private funds to overcome shortfall in revenue earnings.
News report said deposit at banks dipped by 1.07 percent in January from a month ago as savers have moved out money to government saving schemes. Thus total deposit at country’s 56 banks plummeted to Tk 702,814 crore as of January 29 this year from Tk 710,472 crore in December 31 last. The declining trend at banks and contrasting rise at state saving schemes not only poses threat for banks but also blinks an economic disaster as the chain reaction could bankrupt the economic mechanism of the politically riddled state structure.
Banks now offer 7.32 percent on deposits as against 9.50 percent on term loan while state-owned banks offers 8.50 percent. On the other hand, interest on savings certificates range between 11 percent and 13.50 percent. Thus in five months to November of the current fiscal year, gross sales of saving instruments went up by a staggering 82 percent while banks have been sitting on idle cash in absence of big investors who are afraid of putting money in troubled environment.
The investment situation further worsens in January because of continued blockade and strikes. Bankers say the ongoing political unrest, which began from early January has also hit the deposit growth from poor business turnout and even business remaining closed at most time over the past one and a half month to generate income for saving. A section of savers are rather withdrawing deposits from banks to buy things in bulk whose prices might go up anticipating high prices in next few months if the supply chain continues to suffer longer. Many small savers are also withdrawing money to make a living in absence of enough earning. Bank-wise, deposits at state-owned banks went down much more by 1.59 percent poising bigger danger of low cash base in coming months.
We are afraid of the declining deposits at banks may not only reduce fund in their hands, although they are also not having enough investors at the moment, the problem is likely to hit the overall cash base of the banks over longer term. But banks are not the one alone to suffer from the economic downturn, almost all sectors of the economy is facing the crunch making the banks to suffer as a chain reaction. It is imperative we believe at this stage to rejuvenate the economy by fixing the political turmoil. Otherwise, it would not only slowdown the growth; a stagflation may also hit the nation from poor investment in one hand and growing inflation on the other at the end. There is no alternative to quickly fix the crisis.
