Bank deposits grow Tk18,500cr in March

Infograph: TBS

Banks have witnessed growth in deposits for three consecutive months, which indicates that people's confidence in the country's banking sector is coming back.

Data from the Bangladesh Bank show a Tk18,529 crore increase in deposits in March compared to the previous month.

At the same time, loan disbursements also reported an increase of Tk12,155 crore.

According to bankers, people are getting their confidence back in the banking system, although not all banks are experiencing a similar response. Banks that have fewer non-performing loans and good governance are in a better position for deposit collection.

On condition of anonymity, the managing director of a bank said customers of Islamic banks have been making deposits in conventional banks for the last two months. Foreign banks were also getting very good deposits, which means deposits are shifting from one bank to another.

Besides, banks have become very cautious about granting loans as many of the previous ones have defaulted. Moreover, due to liquidity stress in the banking sector, not all banks are in a position to lend much. Some banks are still in liquidity stress; these banks regularly borrow from the call money market and the central bank, he added.

Ali Reza Iftekhar, managing director of Eastern Bank Limited (EBL), told The Business Standard, "I can talk about my bank. We are getting enough deposits. Many banks, like EBL, are also seeing an increase in deposit collection. The central bank is providing liquidity support through Repo (liquidity support against Treasury bills and bonds). Therefore, the liquidity crunch among banks has eased." 

"Usually, opening letters of credit (LCs) creates loans. Banks decrease their import LC openings due to the foreign currency liquidity situation. So, the loan growth has slowed down," he added.

According to data from the central bank, total deposits in banks stood at Tk15.23 lakh crore at the end of March 2023, up from Tk15.05 lakh crore a month ago.

In November 2022, the deposits stood at Tk14.87 lakh crore, which increased to Tk14.89 lakh crore in the following month.

In January this year, deposits were Tk14.88 lakh crore.

Demand deposits in March were Tk1.80 lakh crore, which was 1.79 lakh crore in February this year.

A significant growth in time deposits was reported. From Tk13.26 lakh crore in February, it rose to Tk13.43 lakh crore in the next month.

At the end of March 2023, the amount of loans in the banking sector stood at Tk14.29 lakh crore, which was Tk14.17 lakh crore a month ago. It was Tk14.11 lakh crore in January.

The year-on-year growth in deposits in March was 7.53%. The rate was 6.86% in February. On the other hand, loan growth declined to 13.12% in March from 13.26% in February 2023.

Most banks raised deposit rates in March

Most banks increased deposit and lending rates at the same pace in March. As a result, banks' interest income became stable in March compared to February.

According to central bank data, the average interest rate on deposits rose to 4.35% in March from 4.31% in the previous month. 

In March, the average interest rate on loans rose by 4 basis points to 7.31% from a month ago. 

On 15 January this year, the central bank lifted the deposit rate cap fixed at 6% and allowed a 3% interest rate hike on consumer loans. Subsequently, commercial banks increased the deposit rate to attract more deposits.

Currency outside banks also decreased by Tk3000cr

The data from the central bank show that currency outside banks decreased by Tk3,000 crore and stood at Tk2.55 lakh crore in March from Tk2.58 lakh crore in February.

Bankers said that when currency outside banks decreases, the liquidity flow in banks grows. It is very positive for the whole economy because the flow of liquid money increases when it is in the banking channel. It creates more deposits and loans, which increases the pace of economic activities in a country.