Deposits soar despite falling returns

Banks' deposit grew aggressively last year in spite of the declining returns.

In December 2015, the average rate of interest on bank deposits stood at 6.34 percent in contrast to 7.26 percent a year earlier.

The rate of inflation rate is a little above 6 percent, meaning savers do not get much of a return after adjusting for the rise in price level.

Khondkar Ibrahim Khaled, a former deputy governor of Bangladesh Bank, people have been depositing their money with banks as they do not have any better alternatives to park their funds.

People abroad have the option of investing their savings in the stockmarket. “Here, after the two crashes, people have lost their trust in stocks.”

Zaid Bakht, chairman of Agrani Bank, said another reason for the fast increase in deposit base is that the investment situation is dull.

Many businessmen and industrialists have been unable to invest their money for various reasons and the money has been kept idle in their deposit accounts with the banks, he added.

On December 31 last year, the banks' deposits stood at Tk 803,512 crore, up 13.1 percent year-on-year, according to central bank statistics.

The private banks, where the rate of interest is even lower than at state banks, saw their deposits swell the most, of 14.45 percent. The state banks' deposits grew 12.98 percent.

In state banks, the interest rates ranged between 4 percent and 7.5 percent, whereas it is 5 percent to 6 percent in private banks.

Helal Ahmed Chowdhury, former managing director of Pubali Bank, echoed Khaled's views.

“There is no bond market now, and the share market is also not investment-friendly. As a result, people have no option but to keep their savings in banks.”

Chowdhury also said people's income has been increasing and every year a large amount of remittance has been flowing into Bangladesh.

“For these reasons, the deposit has increased in banks.”

However, the scenario is different in case of foreign banks: their deposit grew only 0.77 percent.

Deposit in large foreign banks did not increase at all; rather, it decreased in the last one year.

The officials of the banks said ordinary people usually do not go to foreign banks. On the other hand, the foreign banks are not looking for deposits as the investment situation is not good.