Savers affected as banks cut interest rates on deposit
Banks’ deposit growth has surpassed credit growth by 9 percentage points, which may take a toll on their profits and affect the savers.
The amount of deposit grew by 17.74 percent on June 13, while credit rose by 9.41 percent, compared to last year, according to central bank statistics.
Bank officials said, due to a huge gap between deposit and credit, profit of most banks marked a fall in the first half this year.
Banks are giving interest to their depositors but cannot invest the deposited money, the officials said. As a result, their cost of fund is going up, they added.
The banks have already started cutting the interest rates on deposits to rein in the cost of fund, the officials said.
An official of NCC Bank said they have instructed their branches to lower the rate of interest on deposit. Several other banks have taken the same initiative, he added.
Managing Director of Pubali Bank Helal Ahmed Chowdhury said if the situation continues to prevail, their profitability may be hampered. He also admitted banks are lowering interest rates on their deposits.
If the banks cannot invest the deposited money, their efforts to cut the lending rates will turn futile, Chowdhury said.
However, he said, “As the country is heading towards the national election, investment will bounce back as soon as the political situation improves.”
An official of Agrani Bank said many banks raised deposits by offering attractive interest rates. In recent times, many banks offered much higher interest rates, sometimes 14 percent to 14.5 percent, which contributed to the rise in deposits.
Due to the sluggish stockmarket and lower interest rates on various savings instruments, people prefer to save money with banks, officials said.
Many banks have also opened Islamic banking wings which helped raise their deposits.
Islami Bank’s deposit growth was 14.26 percent, while the deposit in the commercial banks’ Islamic banking wings rose as high as 376 percent, according to Bangladesh Bank statistics.
The banks cannot give loans keeping pace with the rise in deposits due to a dull investment climate and the banks’ cautious stance in the wake of various scams and political unrest.
As a result, banks’ excess liquidity reached around Tk 72,000 crore at the end of May.
Credit in state-owned banks grew by 7.20 percent on average, while such growth was below 6 percent in some banks.
Many of the private banks saw a credit growth at 1 percent to 5 percent.
In two private banks, credit growth was negative. Credit in three top ranking foreign banks fell by 4 percent to 14 percent on June 13, compared to the same day a year ago.
Source:The Daily Star
