Kazi Zahidul Hasan :
Individuals and retires relying on fixed deposits (FDs) for interest income are turning to other financial instruments in the wake of falling bank deposit rates.
Even, they are going for ‘speculative’ investment options for higher returns risking their whole investment, sources said.
“With interest rates on fixed deposits continue to fall, people are turning to shares, mutual funds, debentures, national saving instruments and bonds for higher returns,” a senior executive of a state-owned bank, told The New Nation on Wednesday, asking not to be named. He said those who are pulling off their deposit from banks are mostly living in big cities and turning to other financial instruments as the falling deposit rates have badly affected their interest income. “The trend would continue further unless the private sector investment gets a fresh boost,” he added. When asked, the official said, “The persistence slowdown in credit off-takes by private sector’s entrepreneurs has led to pile up excess liquidity in the banks. It also forced them to cut cost of deposit collections in order to protect their profitability.”
Banks’ excess liquidity hit at Tk 130,000 crore as on December last year. The weighted average interest rates on deposit rates in December stood at 5.13 per cent at the state-owned commercial banks, 6.44 per cent at the specialized banks, 5.42 per cent at the private commercial banks and 1.79 per cent at the foreign commercial banks, according to the latest Bangladesh Bank figure.
“People are putting their money in shares, mutual fund and debenture as a low-deposit rate regime is prevailing. In the last two months, we got many new clients who opened beneficiary owner (BO) account and started share trading,” a stock broker at the Dhaka Stock Exchange (DSE), told The New Nation on Wednesday. “Their entry into the stock business has already pushed up the overall trading turnover in the country’s two bourses,” he added.
Referring to an official figure, the stock broker said, over 29,000 BO accounts were opened over the last three months (November-January) and 10,000 were opened in December last year alone.
“The sudden rise in BO accounts indicates that new investors are entering the capital market with an aim to yield higher returns from their investment,” he said.
People’s growing trend is to invest in risky financial instruments (shares) worries the central bank, which asked the commercial banks to prevent the deposit rates from further falling.
“The declining deposit rates are affecting people’s habit of savings and encouraging them to put their money into speculative investment and spent money into wasteful purpose and unproductive sectors,” it said in a circular issued on Tuesday.
