Non-bank funds increased and reached Tk 2.92 billion. Bankers said the decline was caused by the collapse of the Awami League government in the face of nationwide unrest, reports of widespread loan fraud, erosion of public confidence and runaway inflation.
October 8, 2024, 12:05 AM
Last updated: October 8, 2024, 12:31 AM
Infographics: TBS
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Infographics: TBS
Bank deposits in August decreased month-on-month, reaching 7.02%, the slowest growth rate in 18 months.
Bankers said the decline was caused by the collapse of the Awami League government in the face of nationwide unrest, reports of widespread loan fraud, declining public confidence and runaway inflation. .
Banking officials added that the tendency of depositors to withdraw funds decreased in September, thanks to various measures taken under the new interim government to restore confidence in the banking sector.
In addition to a decline in deposits, the amount of cash held by citizens increased by about Tk 840 million in August as individuals opted to hold on to liquid cash amid widespread uncertainty.
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Selim RF Hussain, managing director of BRAC Bank, told Business Standard: “July and August were the year of the year due to a crisis in customer confidence in the banking sector due to a variety of factors, mainly the nationwide unrest. “It’s been a difficult month for our bank accounts.”
“Furthermore, the weakness of nine to 10 banks is also contributing to this problem. Collectively, these factors are leading to lower deposit growth rates across the banking sector.”
The veteran banker pointed out that deposits in the banking sector have started increasing again since September.
According to central bank data, total deposits decreased to Tk 17.31 billion in August, reflecting a 0.16% month-on-month decline. The year-on-year growth rate of deposits in August was 7.02%, the lowest in 18 months, with the previous lowest of 6.86% recorded in February 2023.
Analysis of central bank data reveals that banking sector deposits typically increase each month compared to the previous month. However, deposits decreased instead of increasing in both July and August.
As of the end of June this year, the total deposits were Tk 17.42 billion, showing a decrease of about Tk 11,000 billion in two months.
Executives of several private banks pointed out that despite the prevailing situation in the country, there has been a significant increase in deposits in reputed banks. On the other hand, customers lose trust in weaker banks and choose to park their funds in more stable financial institutions instead.
Abdul Mannan, chairman of First Security Islamic Bank, told TBS that banks that are currently perceived as weak were once strong, and that today’s strong banks were once weak. He stressed that the banking sector should not be categorized into strong and weak institutions.
Commenting on the reduced withdrawal pressure at his bank, the experienced banker said, “Our board is now very strong and we have confidence in the skilled people working within the bank.” In the past month, we have added 54,000 new accounts.” ”
“Through these accounts, we received fresh deposits totaling Tk 34 million.Furthermore, we started recovering confidential loans and were able to recover over Tk 515 million in just one month. We hope to see further positive changes in the next two to three weeks.”
By the end of August, the amount of cash held outside the banking system reached Tk2.92 billion, an increase of Tk840 million from July, according to central bank data. The figure was Tk 2.58 billion at the end of August last year.
Economists have expressed concern that the amount of money held outside the banking system is increasing, slowing the creation of deposits and loans. They pointed out that the increased flow of cash outside banks is having a negative impact on the economy.
A senior central bank official said people chose to hold on to cash in July due to uncertainty, fear and inflation. The country’s inflation rate fell from a record high of 11.66% in July to 10.49% in August, a decline of 1.17 percentage points and the biggest decline since 2013, according to data from the Bangladesh Bureau of Statistics. In September, the inflation rate fell further to 9.92%.
