Deposits up by Tk23,254cr in Jul-Aug

Despite the high inflationary pressure and negative interest rate on deposits compared to inflation, the total amount of deposits in the banking sector increased by Tk 23,253 crore to Tk 16,18,508 in the July-August period of FY2023-24, compared to the same period in FY2022-23.

According to the latest Bangladesh Bank (BB) data published on Wednesday, the total deposit amount in the banking sector was Tk 15,95,254 crore in July-August of FY23, which was Tk 2,735 crore lower than the same period in FY2021-22.

Among the total deposits in the banking sector, the amount of demand deposits decreased by Tk 13,341 crore to Tk 1,86,632 crore in July-August of FY24, compared to the previous FY.

However, the time deposit has increased. During July-August of FY24, this amount increased by Tk 36,596 crore to Tk 14,31,876 crore, compared to FY23.

Time deposit tenure usually ranges from one month to several years. A bank can hold this money for a certain period, which basically acts as a lifeline for the banking business. Bankers have said that an increase in such deposits is a positive sign for the economy.

According to the Bangladesh Bureau of Statistics (BBS), in July this year, the point-to-point inflation rate was 9.69 percent and in August, it was 9.92 percent. In the same months, the weighted average bank deposit rate was 4.46 percent and 4.52 percent, respectively.

Compared to the inflation rate, it indicates that the real interest rate on bank deposits was negative 5.23 percent in July and 5.4 percent in August.

In such a situation, the question that comes to the forefront is - why are bank deposits increasing even though the real interest rate is negative?

Asked about this, Dhaka Bank Ltd Managing Director Emranul Huq said that the next general election is just a couple of months away and due to the volatile situation of the economy, many are not investing now. As a result, many people are now bringing the money to the bank.

But at the same time, he said, even though the deposits are increasing, it is not growing as expected. According to Emranul, deposits are increasing only in some banks, not in all banks.

Due to the irregularities of some Shariah-based banks that came to light last year, depositors’ tendency to withdraw money from banks increased. Bankers believe that bank deposits are increasing now as the situation has calmed down to some extent.