Deposits (excluding interbank and government deposits) in the country’s banks fell to Tk1,731,260 crore in August, down from Tk 1,734,026 crore in July and Tk 1,742,224 crore in June.
Bank deposits have dropped by about Tk 11,000 crore in recent months, driven mainly by anxiety among depositors, according to as per Bangladesh Bank data.
Deposits usually increase steadily as banks add monthly interest payments back to principal amounts, thus increasing deposit balances, bankers said.
Therefore, the recent decline signals issues in the banking sector, they further said.
They also said that a combination of factors, including a crisis of confidence among depositors due to massive irregularities and an increase in non-performing loans in the country’s banking sector during the Awami League regime, high inflation, macroeconomic instability and political uncertainty, was behind the drop in deposit volume.
These issues led to heavy withdrawals, reduced deposit inflows, and the shrinking of the overall deposit base, they added.
Of the total deposits, Tk 1,537,000 crore of the deposits were time deposits, while Tk 193,000 crore was demand deposits.
Despite banks offering higher interest rates on deposits, these failed to attract depositors.
Instead, rising inflation, a tight monetary policy and an increase in currency held outside banks further contributed to shrinking deposit volumes.
Many depositors withdrew their savings to cover basic expenses as inflation soared.
Although inflation eased slightly to 9.92% in September from a peak of 10.43% in August, it remained high, affecting particularly fixed-income households.
Fixed-income and low-income households have been struggling with rising commodity prices, leading to more withdrawals than deposits.
Currency held outside banks surged to Tk 292,000 crore in August, up from Tk266,000 crore in July.
Furthermore, many depositors found national savings certificates, which offer about 12% interest rate, to be a safer and more lucrative investment option compared with banks.
While the deposit volume shrank, loan disbursement continued to rise, reaching Tk 2,098,000 crore in August, up from Tk 2,085,000 crore in July.
The interbank currency rate also surged to Tk 120 in August 2024 compared with that of Tk 84.8 in August 2021.
