Bank sector deposits are increasing. The liquidity crisis is over. According to the data of the central bank, the deposits in the bank sector have increased by 1 lakh 65 thousand crores in the span of one year. At the end of December 2023, deposits in the bank sector stood at Tk 16 lakh 54 thousand crore – which was Tk 14 lakh 89 thousand crore in the same period of the previous year.
Central bank officials say that interest rates on deposits have increased due to increase in loan interest. And due to increase in interest rate on deposits, interest income-dependent depositors are getting some relief.
MDs of the bank say that this is having an impact after the introduction of the new method of fixing the interest rate. In particular, interest rates are being raised according to the central bank’s smart rate (the average rate of six-month Treasury-bill bonds). The central bank has set the maximum interest rate for bank investment (loan) at 12.43 percent for the current month of February. Among them, Islami Bank, which is facing liquidity crisis, is taking deposits with a maximum profit of 11 to 12 percent at a more competitive rate. Which is believed to be one of the main reasons for the growth in deposits. Earlier, the interest rate on deposits was lower than the rate of inflation for more than a year.
It has been reported that banks with insufficient Mandatory Deposit Reserve Ratio – their cash reserve ratio (Cash Reserve Ratio or CRR) and statutory deposit ratio (Statutory Liquidity Ratio or SLR) have become difficult. They have to attract deposits with high interest rates. Savers are benefiting from this. However, interest rates on deposits were lower than the inflation rate for more than a year earlier.
It is known that the banks which are in liquidity crisis are now taking relatively higher interest deposits. Some banks are charging up to 13.40 percent interest on deposits. As a result, cash in people’s hands has started returning to banks. Private Padma Bank is taking fixed deposits at more than 10 percent interest. National Bank is offering double interest of 13.40 percent in five and a half years in Special Savings Scheme. Shariah-based Social Islami Bank offers 9.5 percent profit on three-year term deposits. Some banks in crisis are paying higher interest than declared.
According to the data of the central bank, deposits in the bank sector increased by 11.4 percent in December 2023. This rate is the highest in the last 28 months. Earlier, the deposit growth rate reached 11.26 percent in September 2021.
In this context, Syed Mahbubur Rahman, former chairman of ABB and managing director of private sector Mutual Trust Bank, told Bangla Tribune, ‘Banks usually campaign vigorously towards the end of the year to increase deposits to strengthen their balance sheets. It happened this time too. Besides, the interest rate has increased. Depositors also chose to save in banks. It has increased deposits.’
Incidentally, interest rates on deposits started rising only after the single-digit cap on loan interest rates was withdrawn in April 2020.
In this context, the executive director of the private research institute Policy Research Institute. Ahsan H. Mansoor said, ‘The interest rate on deposits is increasing as the limit on loan interest rate is lifted.’ He said, ‘All types of interest rates have increased due to the increase in the policy rate. However, the deposit rate is still low compared to the inflation rate.
Incidentally, from July 2023, the central bank announced the ‘smart rate’ by lifting the interest rate limit on bank loans. The interest rate spread was also lifted in September. As a result, banks are now able to take deposits at higher interest rates. Currently, the consumer lending rate changes based on the six-month Treasury-bill bond average rate (SMART). Along with this, banks can give customer loans by adding 3.75 percent margin.
According to the data of the central bank, the amount of money outside the bank decreased by 37 thousand 53 crores in the last six months from July to December last year.
