Excise duty on bank accounts!
The banking sector of Bangladesh may face difficulty in dealing with its customers due to increase of excise duty on debit and credit balances. People will be reluctant to use banking services and withdraw their savings; this may cause bank run in the financial sector. No one can expect negative returns on their savings account. On the other hand, no tax is levied on the interest of savings certificate and interest rate of savings certificate is higher than deposits of banks. This will keep the people away from using banking services.
The government has also decided to take a domestic debt of TK 28,203 crore from the banks in the fiscal year 2017-18.People will prefer to use non-banking channels to execute transactions that will produce negative impacts on the economy that may lead to increase in shadow money. As a result, the banks may face a liquidity crisis. The spirit of financial inclusion will be hampered. It will narrow the space for small investors to invest their savings in other fields because there is no bond market, and the health of the capital market and financial derivatives are not strong.
Therefore I urge the authorities to reduce the excise duty on debit and credit balances to ensure expected returns.
Newton Mia
Department of Banking and Insurance
University of Dhaka
