Savings tools see more encashment than deposit in Jul-Nov

Savers pulled out Tk36,549 crore from the savings certificates in the first five months of FY23 as new investment during the time was Tk34,934 crore, according to the central bank, thanks to inflationary pressures that caused people to withdraw the money in search of higher returns or to protect their purchasing power.

According to the Bangladesh Bank, people took out Tk1,610 crore more than the new investments in savings certificates in July-November period of the current fiscal year.

Infographic: TBS

The government set a Tk35,000 crore borrowing target from savings certificates this year. But the authorities had to pay Tk1,610 crore to savers in the first five months, let alone borrowing in July-November.

During the corresponding period last year, the government's net borrowing from savings tools stood at Tk10,025 crore. The amount in the first five months of FY21 was Tk19,044 crore.

Bankers said they are getting less-than-usual clients coming for opening a Deposit Pension Scheme (DPS) or Fixed Deposit Receipt (FDR) in recent months, while the personal loan curve shows an uptrend.

"People are going through some sort of financial uncertainties due to rising inflation. They now prefer pulling out the money as soon as their savings mature and keep some cash in hand instead of making new investments," Syed Mahbubur Rahman, managing director & CEO of Mutual Trust Bank, told The Business Standard.

Referring to the Covid time, he said the investment outlook then was not as dull as it is now. "Because, there was not a biting inflation during the pandemic. Besides, banks fell into a liquidity crunch soon after the pandemic ended due mostly to buying extra dollars."

However, Ahsan H Mansur, executive director of the Policy Research Institute, said setting a ceiling to limit the savings tools buying and mandating return submissions for savers could have also impacted the savings outlook.

In a similar tone, Director of the National Savings Directorate Mohammad Shah Alam said investments to national savings certificates started to decline following the interest slashing. Besides, investments in bonds by expatriates are also declining.

He mentioned that the directorate has relaxed mandatory national identity card rules to boost the expat bond investment.

According to the Bangladesh Bureau of Statistics (BBS), the inflation rate in September this year was 9.10% on a point-to-point (monthly) basis. In August, the rate was the highest at 9.52%. After a slight fall, Bangladesh inflation was 8.91% in October and 8.85% in November.

On the other hand, the wage index was 6.86% in September, 6.91% in October and 6.98% in November. Economists and bankers argue that actual inflation is higher than the BBS estimation. However, the public data itself leads to the question of how people would save when their income falls short to rising commodity prices.

Similar to declining investment in savings tools, deposit growth in banks is also low, according to the central bank. October deposit growth was 7.35% while credit growth was 14.69%.

As people tend to keep some cash readily available, the amount of cash in people's hands was Tk2.36 lakh crore in October this year – up from around Tk2 lakh crore in the same month last year.

Though the number of bank accounts with minimum deposit of Tk1 crore soared during the pandemic, it edged down by around 2,000 in July-September this year. Their deposits with banks also fell by Tk27,567 crore.

According to the central bank's Scheduled Banks Statistics data in September this year, bank accounts with more than Tk1 crore stood at 1.65 lakh, totalling to a deposit of Tk652,794 crore.