Govt banks attract more deposits with timely return guarantee

When a microcredit finance institution approached multiple scheduled banks to deposit Tk100 crore, it was offered the annual deposit rate of 8% from private banks, while a state-owned bank offered 7.52%. But the company intends to deposit the amount in the state-owned bank due to its focus on deposit security and prompt interest payments.

An official from the company, speaking anonymously, informed The Business Standard that withdrawing deposits in several private banks is often delayed. These banks are unable to promptly release funds, especially during financial crises.

Consequently, despite the lower interest rate, the company prefers to deposit their funds in state-owned banks to ensure timely payment and deposit security, he said.

Moklesur Rahman, treasury head of state-owned Agrani Bank, said customers want deposit security and timely returns of their money. While certain private banks may offer higher deposit rates, they often delay the disbursement of funds when customers request withdrawals.

"In contrast, government banks have a track record of consistently meeting customer demands for timely deposit payments. So, customers exhibit a greater interest in depositing their funds with state-owned banks," he added.

Moklesur further emphasised that in case of any issues faced by private banks, customers often encounter difficulties in retrieving their funds. In contrast, state-owned banks do not face the risk of bankruptcy unless the entire state faces financial insolvency. 

"Hence, customers perceive a higher level of security when depositing their funds in state-owned banks," he said.

As per the central bank's data, as of December 2022, the total deposits in the country's 61 banks amounted to Tk15.88 lakh crore. Among these, the deposits in six state-owned banks exceeded Tk4 lakh crore, accounting for 25.25% of the total deposits.

A managing director of a bank said on condition of anonymity that typically, during a stable economy, people tend to invest more in high-risk sectors. However, when the economy faces abnormalities due to various factors, individuals prioritise investments in sectors that offer higher safety, even if the potential profits are lower.

He said that in recent times, certain reputable banks in the country have experienced deposit withdrawals from customers, primarily due to the news regarding loan irregularities within these banks. Since customers are unable to retain their funds for an extended period, they are seeking alternative investment opportunities.

So, they are depositing their funds in state-owned banks, which offers them a higher level of confidence in retrieving their money when needed, said the top bank official.

Additionally, the managing director stated that institutions responsible for various government services prioritise depositing their funds in government banks. This preference stems from past experiences where certain government institutions deposited their money in private banks but encountered delays in receiving their funds. As a result, these institutions have lost interest in keeping their deposits in private banks.

According to officials from Dhaka Water Supply and Sewerage Authority (Wasa) and Bangladesh Power Development Board (PDB), certain private banks in the country accept payments for electricity bills, gas bills, and water bills. So, service providing government institutions maintain accounts with these specific banks, often utilising them for depositing bill payments.

However, there is currently a sense of urgency among these service sector institutions to withdraw their deposits from these banks, they said.

An official from the accounting section of Rajdhani Unnayan Kartripakkha (Rajuk) stated that despite private banks in the country offering interest rates of 8% to 9% for deposits, they remain hesitant to deposit funds in these banks.

According to the accounting section of some government institutions, they are interested in keeping deposits in 'A' and 'B' class banks. At present, according to the rating, the number of 'A' class banks is less than 10, while the number of 'B' class banks is about 30. 

So in most cases, these institutions keep more deposits in 'A' class banks, where most of the banks are state-owned.