Home Today's Paper Most Popular Video Gallery Photo Gallery
Subscription Blog Signin Register
Logo
Tuesday, June 19, 2018 04:51:34 PM
Follow Us On: Facebook Twitter Twitter Twitter Twitter

Banks suffer

Lower interest drives away depositors

By
21st-Mar-2017       
Comments
Share your thought
Post a comment »
Read all () »

Anisul Islam Noor :
The country's banking sector has witnessed slow growth of deposit in the current year compared with previous year, sector insiders said.
They said, the depositors these days feel discouraged from putting money in banks for lower interest rates.
The growth of deposits, on a year-on-year basis, rose to 13.13 per cent in the last calendar year from 13.08 per cent a year ago while the credit growth increased to 15.32 per cent from 12.58 per cent, shows a Bangladesh Bank data.
The deposit growth decreased gradual mainly due to lower interest rates, offered by the banks, central bank sources said.     The growth rate of deposits came down to 13.5 per cent in September 2016 from 14.46 per cent at the end of June. It further came down to 13.13 per cent in December the same year.
On the other hand, the credit growth climbed to 15.32 per cent in December from 14.5 per cent in September 2016. The rate was 15.42 in June.
Bankers and experts said, depositors now feel encouraged to invest their money in government savings schemes and stock market for getting higher returns on their investments.
Some depositors also prefer Non-Banking Financial Institutions (NBFIs) to banks in depositing their money because it offers higher interests on term deposits, they added.
The NBFIs are now offering interest rates on term deposits ranging between around 6.0 per cent and 16 per cent while the banks offer a near-negative 0.10 per cent to maximum 9.50 per cent.
The NBFIs are now allowed to collect fixed deposit from individuals and organizations for three months instead of previous term of six months.
The banks, however, offer interest rates on savings deposits ranging between 0.40 per cent and 6.0 per cent, according to the BB's latest monitoring report.
"Such falling trend in interest rates has pushed far down the overall deposit growth than credit growth in the banking sector," a senior official of the Bangladesh Bank explained.
He also said the deposit-growth rate fell slightly in the recent months following adjustment of loans with loans and 'push loans' particularly in small and medium enterprise (SME) sector.
Such comparative trends between deposits and credits had continued until February last, according to the central banker.
All banks' deposits, excluding inter-bank balance, rose to Tk 9088.64 billion as of last December from Tk 8583.31 billion as of June 30, 2016. The aggregate deposit amounted to Tk 8033 billion as of December 2015.
On the other hand, their outstanding loans, excluding inter-bank balance, rose to Tk 6864.80 billion as of December 2016 from Tk 6421.74 billion. The amount was Tk 5953 billion in December 2015.
"Depositors, particularly small ones, are now losing interest in making further deposit with the banks mainly due to lower interest rates on deposits," said Dr. Salehuddin Ahmed, a former BB governor.
Besides, such lower interest rates on deposits cast an adverse impact on people's savings habit, particularly in the banking system, Dr. Ahmed explained.
"Such discouraging savings tendency has also pushed up currency outside banks," the former governor said while explaining the impact on the financial front.
The overall currency outside banks (money kept in traditional caches instead of depositing into bank account) jumped by 22.27 per cent or Tk 206.08 billion to Tk 1131.53 billion in December 2016 from Tk 925.45 billion a year ago, the BB data showed.   
Contacted for his remark on such a situation with savings, SK Sur Chowdhury, Deputy Governor of the BB, said the central bank had already issued a directive to the managing directors and chief executive officers (CEOs) of all the scheduled banks to remain proactive and help check the falling interest rates on deposits.
The latest BB move came against the backdrop of a faster decline in deposit rates than that of the lending rates.
The weighted average interest rates on deposits came down to 5.22 per cent in December 2016 from 5.39 per cent three months ago. It was paid at 5.54 per cent by the banks last June.
The weighted average deposit rate at more than 20 banks slipped below 5.0 per cent in December 2016, according to findings in the BB report.
On the other hand, the weighted average interest rates on lending came down to 9.93 per cent in December 2016 from 10.15 per cent three months before. It was 10.39 per cent in June last. In January 2017, the weighted average interest rates on deposits came down to 5.13 per cent from 5.22 per cent a month before while the weighted average interest rates on lending fell to 9.85 per cent from 9.93 per cent.
"We've taken the latest measures to protect the interests of depositors," Mr. Sur Chowdhury told media while explaining the main objective of the moves.
It will also help discourage expenses in the less-productive sectors, the Deputy Governor noted.
He also said the falling trend in the interest rates on deposits affected the saving habit of the people, prompting them to spend on wasteful consumption and unproductive sectors.
However, the credit-deposit ratio (CDR) -- officially known as advance-deposit ratio (ADR) -- of all banks reached 71.85 as of December last from 71.59 per cent as of June 30. It was 70.98 per cent as of December 31, 2015.
Earlier, the central bank had set the safe limit of CDR at 85 per cent for conventional banks and at 90 per cent for Shariah-based Islamic Banks.

Tariff
Add Rate

News Archive

Inside The New Nation

Editorial »

Save the flood victims and take adequate measures for post-flood rehabilitation


INCESSANT rainfall in the last few days has triggered floods in the country's East and South East districts. Thousands of people of Moulvibazar, Habiganj, Feni and Chattogram districts have been marooned as floodwater crawled to inundate their homestead and damage crops and livestock. The New Nation recently reported that Khowai, ...

Football »

A Mexico soccer fan celebrates her team victory against Germany after their group F match at the 2018 soccer World Cup in the Luzhniki Stadium in Moscow, Russia on Sunday.


Sports »

Federer wins 98th ATP title in Stuttgart


AFP, Germany :Roger Federer claimed his 98th ATP title on Sunday with a 6-4, 7-6 (7/3) defeat of Milos Raonic in the grass-court Stuttgart Cup final.The Swiss great, who will be chasing a ninth Wimbledon triumph next month, beat his Canadian opponent for the 11th time in 14 meetings while ...

International »

US policy on migrant kids `unconscionable`: UN rights chief


AP, Geneva :The U.N. human rights chief is urging the Trump administration to end new policies separating migrant children from their parents after entering the United States from Mexico, saying they've affected nearly 2,000 kids in the last six weeks.Zeid Ra'ad al-Hussein says it's "unconscionable" that any country would seek ...

International »

Family separation policy starts dividing Republicans


AP, Washington :The emotional policy of separating children from their parents is also starting to divide Republicans and their allies as Democrats turn up the pressure.Former first lady Laura Bush called the policy "cruel" and "immoral" while GOP Sen. Susan Collins expressed concern about it and a former adviser to ...

City »

Prime Minister Sheikh Hasina exchanging pleasantries with diplomats at Ganabhaban in the city on Saturday on the occasion of holy Eid-ul-Fitr.


Editorial »

Eid Mubarak


EID UL FITR is an important religious event celebrated by Muslims worldwide that marks the end of Ramadan, the Islamic holy month of fasting (sawm). The Eid (Muslim religious festival) is the first and only day in the month of Shawal during which Muslims are not permitted to fast. The ...

Cricket »

History-making Afghanistan get baptism of fire in Test cricket


AFP, Bangalore :Afghanistan were handed a bruising introduction to Test cricket by India on Thursday as they capped their astonishing rise from war and refugee camps to joining the sport's elite.Afghan skipper Asghar Stanikzai called it a "very proud moment" as he strode onto the field at Bangalore's M. Chinnaswamy ...

Football »

Orlando City midfielder Josue Colman kicks the ball away from Montreal Impact defender Rod Fanni during the second half of an MLS soccer match on Wednesday in Montreal.


Football »

German Chancellor Angela Merkel (center) and the former German national soccer team player and integration commissioner of the German soccer association, Cacau (right) attend a women soccer training session at a soccer club in Berlin, Germany on Wednesday.


International »

World can `sleep well` after North Korea summit: Trump


A jubilant-sounding President Donald Trump declared Wednesday that his "deal" with Kim Jong Un has ended the North Korean nuclear threat, as his top diplomat said he hoped to see "major disarmament" of the country by 2020.Despite the lack of detail, or binding terms in the joint statement agreed with ...

International »

UN rights office calls for int’l probe in Kashmir


AP, Geneva :The U.N. human rights chief called Thursday for an independent, international investigation into reports of rights violations in the disputed region of Kashmir, laying blame for civilian deaths and injuries on the actions of both India and Pakistan.In its first report on the region, the office of Zeid ...

City »

Air Chief adorned with Air Marshal rank badge


A ceremony marking the adorning of rank badge of new Chief of Air Staff Air Marshal Masihuzzaman Serniabat was held at the Prime Minister's Office (PMO) on Thursday.In the presence of Prime Minister Sheikh Hasina, Chief of Army Staff General Abu Belal Mohammad Shafiul Huq and Chief of Naval Staff ...

Entertainment »

Sylvester Stallone under probe for sexual assault


Los Angeles prosecutors said on Wednesday that their sex crimes team was reviewing a case against Rocky actor Sylvester Stallone. Los Angeles District Attorney's office spokesman Greg Risling did not give details but said the case was presented by police in the California beach city of Santa Monica.Representatives for Stallone, ...

Editorial »

Pay the workers immediately, let them celebrate the Eid


NEWS media reported that nearly 40 percent of the garment factories, most of which are small and not members of any trade bodies like the BGMEA or the BKMEA, are yet to pay the workers' salaries or festival bonus although Eid-ul-Fitr is knocking at the door. Most of the 4.4 ...

 
Items that you save may be read at any time on your computer, iPad, iPhone or Android devices.
 
Are you new to our website? Do you have already an account at our website?
Create An Account Log in here
Email this news to a friend or like someone
Email:
Write a comment to this news