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Bank deposits mount in Bangladesh despite rate cuts
Publication Date : 19-08-2014
Bank deposits in Bangladesh rose 15.81 per cent year-on-year in fiscal 2013-14 despite the cuts in interests on savings in the past one year.
On June 30, the total deposit in the banking sector stood at 6.68 trillion taka (US$86.2 billion), with private banks accounting for 63.88 per cent of the sum, according to data from the central bank.
The private banks saw their deposits grow 17.56 per cent, the state-owned commercial banks 13.68 per cent, foreign banks 7.18 per cent and the government-run specialised banks 14.81 per cent.
But it was Islamic banking that saw its deposits increase the most -- by 23.03 per cent -- between June 30 last year and this year.
Khondker Ibrahim Khaled, a former deputy governor of the Bangladesh Bank, said the GDP grew more than 6 per cent, which brought about an increase in people's income and eventually the banks' deposits.
Zaid Bakht, research director of the Bangladesh Institute of Development Studies, said the sluggish phase of the share market is tempting people to put their money in savings instruments or banks.
“But with savings instruments, there are some limitations. So it is the banks who are the biggest beneficiaries of the stock market's depressed phase.
"They still provide 9 to 10 per cent interest rates.”
The average interest rate on savings stood at 8.01 per cent in May, down 0.60 percentage points from July last year.
A high official of the central bank said the figure dipped below 8 per cent in June.
Nurul Amin, managing director of Meghna Bank, echoed the same, adding that many people in rural areas have opened 10 taka ($0.13) accounts taking advantage of the financial inclusion wave taking place right now.
The poor are saving in those accounts, he said, adding that banks have been opening branches in rural areas of late, which is also helping the cause.
The Meghna Bank managing director said another reason for the rise in deposit is the sluggish investment scenario: many businessmen are keeping their investable fund in fixed deposits in banks.