Bank deposits crossed Tk聽17 lakh crore for the first time in May, driven by rising interest rates in the financial market.
According to Bangladesh Bank data, deposits increased by 8.77 per cent to Tk聽17,00,608 crore in May, excluding inter-bank and government deposits, compared with that of Tk聽15,63,499 crore in the same month of the previous year.
Of the total deposits at the end of May, Tk聽15.13 lakh crore was time deposits and Tk聽1.86 lakh crore was demand deposits.
The growth in deposits followed the central bank鈥檚 decision to lift the 9-per cent lending rate and 6-per cent deposit rate caps in July 2023.
On May 8, the BB introduced a market-based approach for determining lending rates, resulting in lending rates rising to 14-17 per cent and pushing deposit rates higher.
Bankers said that higher interest earnings added to clients鈥� deposits, thereby increasing the total deposit volume in banks.
However, the deposit growth has recently slowed due to rising inflation, a contractionary monetary policy and high currency outside banks, they said.
Deposit growth was 14.43 per cent in May 2021, 11.35 per cent in May 2020 and over 10 per cent in May 2019.
Bankers said that deposit growth rate in banks declined due to inflationary pressures in the country as people required withdrawing their funds to meet their daily expenses.
According to Bangladesh Bureau of Statistics data, the overall inflation rose to 9.89 per cent in May, the highest since October 2023, when it hit 9.93 per cent.
Inflation has remained near 10 per cent since March 2023.
Fixed- and low-income group people are facing troubles in meeting household needs due to a continued surge in prices of commodities, bankers said.
So, they are withdrawing their savings rather than depositing money in banks, they said.
Various loan anomalies in a number of banks exposed the sorry state of the country鈥檚 banking sector that also eventually provoked many depositors to withdraw money from banks, they said.
So, currency outside banks soared to Tk聽2.7 lakh crore in May from Tk聽2.55 lakh crore in May 2023.
The average deposit rate in banks was 5.3 per cent and the average lending rate was 10.53 per cent in April.
Many banks are struggling with a shortage of liquidity, causing a substantial rise in the call money rate in recent times.
Amid a dollar crisis, the Bangladesh Bank sold $34 billion to banks in the past three years, which eventually mopped up a huge amount of local currency from the financial sector.
The interbank currency rate was Tk 118, which was Tk 84.8 in August 2021.