Bank deposit growth rises YoY in September

Bank deposits grew 9.51% in September, slightly higher than in the same month last year.

According to data from the Bangladesh Bank, the total deposits in banks stood at Tk16.23 lakh crore in September, compared to Tk16.17 lakh crore in August. In one month, deposits increased by about Tk5,464 crore.

However, this growth is slightly lower than that of last July and August. According to bankers, the primary reason for this is ongoing inflation.

Selim RF Hussain, chairman of the Association of Bankers, Bangladesh (ABB) and managing director of Brac Bank, said, "The central bank has made a commendable decision by lifting the deposit interest rate cap. Despite restrictions on the lending rate, it has seen a slight increase in the past few months."

"As a result, banks are now able to offer higher rates to depositors. Currently, banks are providing more than 9% of term deposit collections, leading to an increase in deposits. However, the growth in deposits is not uniform across all cases. Customers are considering not only higher interest rates but also the overall health of the respective banks," he added.

The seasoned banker noted that the growth of deposits in banks was slightly lower in September due to high inflation.

He emphasised, "Currently, inflation is around 10%, but we cannot increase the interest rate of deposits in that manner. If the interest rate on bank deposits is lower than inflation, people feel less motivated to keep money in banks."

Private sector credit growth slowed for the tenth consecutive month, hitting a 23-month low in September, due to a decrease in the opening of letters of credit (LCs) for imports and a reduction in loanable funds in banks.

In September, loans to the private sector grew 9.69%, compared to 13.97% in November 2022.

According to central bank data, the last time the growth dipped below this figure was in October 2021, when it registered a growth of 9.44%.

A senior official of the central bank said, "The growth in both loans and deposits was almost the same. Given the current context, this is certainly a good signal for the overall banking sector. A major part of our loans is generated by opening import LCs. LC openings fell due to various measures taken by the central bank because of the dollar shortage. This has a direct impact on loan growth."

According to central bank data, the interest rate on deposits in the banking sector was 4.52% in September, and it was the same in August.

Money outside banks decreases by Tk4,850 crore

Central bank data show that the amount of money in the hands of people decreased by Tk4,850 crore and stood at Tk2.54 lakh crore in September compared to Tk2.58 lakh crore in August. 

Bankers said when money outside banks decreases, the liquidity flow in banks grows. It is very positive for the whole economy because liquid money circulation increases when it is in the banking channel. It creates more deposits and loans, which increases the pace of economic activity in a country.

Emranul Huq, managing director of Dhaka Bank, told TBS, "The money transitioning from individuals' holdings to banks is undoubtedly beneficial for our economy."