Savers are returning to banks gradually thanks to the rise in interest rates and lack of attractive investment options in the money market, official sources at the Bangladesh Bank have said.
Dull stock market and investment limits in purchasing savings certificates are motivating savers of all categories to park their money into different schemes of banks, they opine.
Besides, lack of investment opportunities in trade and industrialization drove many towards banks causing a dip in the volume of currency outside the banks, according to the latest data of the BB.
According to BB, currency outside the banks was recorded at Tk 2,920 billion in June 2023 that declined to Tk 2,660 billion in July and Tk 2,580 billion in August.
“A Tk 340 billion is an encouraging sign as money outside the banks is being deposited to banks afresh,” a senior official at the BB told The News Times.
“The reversal is a good sign for the banking sector that has been grappling with liquidity crisis.”
Analysts say the main index of the Dhaka Stock Exchange has declined by nearly 100 points, and transaction volume by about Tk1,000 crore in two months.
Bankers have said such a reversal comes as a matter of blessing for the banking sector now passing through a tough time because of a looming major liquidity crunch amid the central bank’s recent belt-tightening steps to squeeze fund supply into the money market to tame the skyrocketing inflation.
The recently announced SMART (Six-Month Moving Average Rate of Treasury Bill) allured potential depositors to come back into the banking channel, especially at a time when the window for investment continues shrinking ahead of the national elections.
Managing director and chief executive officer of Mutual Trust Bank (MTB) Limited Syed Mahbubur Rahman says the banks have raised both deposit and lending rates in line with the SMART rating paradigm and that changes the scenario of stashed money.
The top executive of the bank finds deposit rates continuously increasing in the banking sector. There are few banks which have started offering depositors as high as nine per cent.
Managing director and CEO of Dhaka Bank Limited Emranul Huq said currency outside the banks had increased largely because of a trust deficit following some reported loan-related irregularities in some Sharia-based banks and depositors driven by the fear of losing their money withdrawn the funds not only from the unconventional banks but also from the banks having poor ratings.
“This is good news that the depositors started returning to the banking channel as they have started believing that banks are the safest place for investment as no bank fails to return funds on demand till today,” the bank’s top executive said.
He said the rate of deposits in banks started rising under this SMART regime as liquidity tightness still persists in the banking system. “The banks having liquidity tightness require credits to improve their balance sheet and they have been offering higher rates to allure the depositors.”
Chairman of Policy Exchange of Bangladesh Dr M. Masrur Reaz said investment instruments for general people on the country’s money market are very limited.
Besides banks, there are areas like savings certificates and capital market where people can make investments. But the share market is unhealthy and putting money in stocks is becoming extremely risky while the rates on savings certificates have gone down logically in recent times, he adds.
