Savings in banks is going to be big liability

MEDIA report said interest rates on bank deposits have plunged below 5 percent and under the rate of inflation in recent time. Meanwhile, the Finance Minister has proposed higher excise duty on bank balances. Under it accounts with balance of up to Tk 1 lakh will remain exempted from excise duty but one has to pay Tk 800 on debit or credit balance exceeding Tk 1 lakh up to Tk 10 lakh. Those having higher amount will be liable to pay higher rates. Protest against such move is getting momentum but the Finance Minister remains unmoved as his focus remained fixed on collecting more revenue at whatever cost on the common people.

What seems to be quite dismaying is that the Finance Minister has ruled out any consequence of excise duty on banking and financial sector. To him such protest is just nuisance as he told media on Tuesday prompting many to wonder what prudential policy he is following in the banking sector. We know banking is sinking in absence of investment climate, as nobody is interested to take big loans. So banks can’t also provide good interest on savings.

Meanwhile, wealthy people are not holding big deposits in local banks, as they are regularly moving out funds abroad and buying assets to make it safe. Foreign countries are benefiting from investment and job creation with money we are regularly losing. One would only fear his policy might bring bigger ruin to the county’s banking and private sector growth if he continues to the faulty policies.

Depositors usually get no benefit against savings accounts with commercial banks after deducting annual fee on bank accounts and inflation rate counted. In the new situation we are afraid, they will even lose part of their deposit by way of excise duty. A person now gets around 4.97 percent interest on a weighted average on saving accounts down from 5.77 percent a year ago as against 5.31 percent inflation in February as per data by Bangladesh Bank. It means a depositor will be a net loser by putting money in banks given the loss of buying power through inflation and excise duty that he has to pay now.

It is going to be a highly critical situation; because people will be punished in a way if they put the money in banks; but they have to save money for daily life and future safety and therefore, they will have to pay a cost of saving now instead of benefiting from such saving.

We know that capital flight is regularly taking place from the country; as wealthy people, bureaucrats and party men are moving out their fortune. They removed over $ 9.0 billion alone in 2013-14 and it stood over $ 70 billion in ten years till 2014. It is illegal and a big crime but we are afraid the Finance Minister’s move will only accelerate such capital flight. The country will be losing its money that could otherwise set up new mills and factories to create more jobs for our growing number of unemployed people.