The Central Bank informs that the amount of people’s deposits in banks increased by 8.1 percent in one year and amounted to 12,524.9 million manats in national currency equivalent as of December 1, 2023.
65.8 percent of deposits were in national currency and 34.2 percent in foreign currency. The amount of deposits in national currency increased by 16.3 percent compared to the same period of the previous year. This shows that people’s confidence in banks is increasing. But what are the reasons behind the increased confidence?
The new rules are paying off
Aydın Huseynov, member of the Economic Policy, Industry and Entrepreneurship Committee of the Milli Majlis In his statement to the “Kaspi” newspaper, he said that the volume of deposits is expected to increase with this move: “The policy implemented by the Central Bank, the improvement of deposit attraction opportunities for banks, as well as the exemption from income tax of the interest of citizens’ deposits in banks from January 1, 2024. led to an increase in the volume of deposits. According to the new rules, the part of the population’s savings in national currency in the amount of 200 manats per month is exempted from income tax. When a citizen deposits 24,000 manats at 10 percent in a bank, his monthly income will be 200 manats, and no tax will be charged on these funds. Or, since the person who deposits 30,000 manats at 8% in the bank earns 2,400 manats per year and 200 manats per month, he will not be taxed. Tax will be charged on the portion after that amount. This will give an additional stimulus to the growth of deposits deposited in banks. Currently, the population’s deposits in banks are close to 13 billion manats, and this figure is expected to increase again by the end of the year.
The Banking Code should be adopted
A. Huseynov said that the increase in the volume of bank deposits stimulates more lending opportunities for banks. The arrival of a number of foreign banks and foreign capital to the banking sector can lead to the strengthening of competition. It is also possible for the Central Bank to recommend a certain dependence between deposit rates and loan rates. Currently, the Central Bank is also working in this direction. A serious reform should be carried out in the field of control of financial markets, control of the banking sector should be strengthened. The activity of the Central Bank alone is low, and the legislative base should be strengthened, and the Banking Code should be adopted.”
People know that they will not lose their money
Khayal Mammadli, an expert on financial and banking issuesaccording to him, insurance of deposits increased people’s confidence in banks: “The reason for the increase in deposits is primarily the normal functioning of the insurance mechanism. The Deposit Insurance Fund has set a maximum limit of 12 percent in national currency and 2.5 percent in dollars and euros. There is an insurance amount of 100,000 manat per person. The working mechanism of the Deposit Insurance Fund shows that even if a bank is closed, deposits are returned on time in accordance with the rules. As the insurance mechanism works normally, people know that the deposit will not be lost and is protected. The rate of return is also quite normal. It is possible to get 12 percent income in national currency.
Increase the amount of the insurance limit
According to H. Mammadli, if certain steps are taken, everything will improve for banks: “The amount of deposits may increase even more in the future. Previously, there was no limit on protected deposits of individuals. Later, a limit of 100,000 manats was determined. If the Central Bank wants the amount of deposits in commercial banks to increase further, it can either increase or cancel the limit of 100,000 manats. At this time, more funds are attracted to banks. However, the funds of legal and entrepreneurial individuals in banks are not insured. If an insurance mechanism is created for them, this will support the increase in the amount of deposits.”
There are some banks that…
Economist Fuad Ibrahimov he said that the increase in interest rates in foreign currency also stimulates people: “The first indicator of the increase in the volume of savings is the increase in deposit interest rates. This plays a big role. In addition, the fact that the insured part of the funds is quite high also has an effect. There are some banks that offer increased interest rates on foreign currency deposits. This is positively accepted by the citizens.”
Abolish this tax
F.Ibrahimov noted that it is necessary to maintain stability in order to further increase deposits: “The income tax applied to deposits has been softened. But it would be good if this tax were abolished altogether. Because it is a factor that hinders the involvement of the money mass in the official circulation. If the tax is removed, it will further stimulate the process.” (“Kaspi” newspaper)
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