How some banks mobilised record deposits despite low industry growth

Infographic: TBS

Highlights

• The average deposit growth dipped to 7.44% year-on-year in December last year
• Among 43 private commercial banks, only eight sustained high deposit collection
• Some troubled banks received unconditional liquidity support from the central bank. 
• Excess liquidity in the banking sector increased by Tk51,000 crore last year

When the country's banking sector experienced its lowest deposit growth in recent history, some private commercial banks excelled, setting records in deposit mobilisation even through the economic crisis of 2024.

The average deposit growth dipped to 7.44% year-on-year in December last year, while some banks achieved growth of over 20% to 30% during the year.  

This contradiction highlights how a strong reputation and consistent service quality enabled some banks to achieve record-high deposit growth, even as the financial sector struggled with low depositor confidence following revelations of massive corruption in some banks after the fall of Sheikh Hasina's 15-year regime on 5 August last year.  

However, the number of banks that maintained steady deposit inflows amid the banking sector crisis is not very high.  

Among 43 private commercial banks, only eight – City, BRAC, Eastern, Dutch-Bangla, Prime, Mutual Trust, Bank Asia, and Pubali – sustained high deposit collection, while most faced withdrawal pressure.  

Strong deposit growth enabled these banks to generate record revenue in 2024, even as the economic crisis persisted, benefiting from low-cost funds and investments in treasury bills and bonds, bankers said.  

For instance, City Bank achieved a 31% deposit growth in 2024 – the highest in its history – compared to an annual average of 18% to 20% in previous years, according to central bank data.  

The bank mobilised Tk12,169 crore in deposits last year, with 55% collected in just three months through September, while many other banks faced heavy withdrawal pressure.  

This surge was driven by depositors shifting funds to well-reputed banks, fearing losses after the country's largest deposit bank, Islami Bank, failed to repay its customers.  By the end of December 2024, City Bank's total deposits stood at nearly Tk51,500 crore.  

Speaking to The Business Standard, Md Arup Haider, deputy managing director and head of retail banking at City Bank, said a portion of the bank's deposits was a consequence of customers' loss of confidence in other banks during July-September.  

However, he emphasised that City Bank's consistent efforts to build a strong reputation also helped it navigate the crisis. The bank's focus on service quality played a key role in attracting more depositors, he added.  

Citing an example, the banker noted that during the nationwide student protests in August last year, most banks struggled to refill their ATMs due to security concerns. In contrast, City Bank used an insured cash transport service to ensure uninterrupted transactions.  

Haider further said strong deposit inflows helped the bank stay afloat while many others faced liquidity crises, enhancing its investment capacity as well.

Last year, City Bank posted an operating profit of over Tk2,300 crore – the highest in recent years – driven largely by treasury investments, according to bank officials.  

Meanwhile, BRAC Bank, one of the largest private commercial banks in SME (Small and Medium Enterprise) financing, recorded a 36% deposit growth – the highest in its history.  

The bank mobilised nearly Tk17,800 crore in deposits last year, up from Tk13,000 crore the previous year, according to central bank data.  

Speaking to TBS, Md Shaheen Iqbal, deputy managing director and head of treasury and financial institutions at BRAC Bank, explained that some depositors shifted their funds to safer banks from those in trouble last year.  

He also made note of the fact that BRAC Bank's significant investment in online banking over the past few years had attracted young depositors. The bank recorded monthly transactions of Tk15,000 crore through its mobile app.  

Iqbal added that the bank's online services and a range of deposit products tailored to different types of depositors were key factors in its record deposit growth.  

Another well-reputed bank, Eastern Bank, saw a 24% growth in deposits last year, with an increase of Tk9,000 crore – the highest in its recent history.  

By the end of December, the bank's total deposits stood at Tk46,453 crore, according to central bank data.  

Mehedi Zaman, deputy managing director and head of treasury, offshore banking and financial institutions at Eastern Bank, explained that customers have long believed they would never lose money in the bank, which led them to overlook concerns about the bank's financial health and credit risk.

Some troubled banks received unconditional liquidity support from the central bank. However, this perception shifted when many weak banks failed to repay their deposits.  

As a result, high-net-worth depositors moved their funds to stronger banks, helping Eastern Bank attract high deposit growth, according to Mehedi Zaman.  

Mutual Trust Bank also saw nearly 24% deposit growth last year, collecting over Tk6,000 crore, according to provisional central bank data. In 2023, the bank's deposit growth was 12.86%.  

"We mobilised the highest deposits in our history last year," said Syed Mahbubur Rahman, managing director of MTB. "We collected Tk1,800 crore in a single month, a record high. This success was driven by our strong brand value and the trust we've earned from customers, many of whom shifted their deposits to us when other banks faced trouble."  

Rahman emphasised that liquidity management was crucial. "The banks facing trouble now are struggling due to liquidity issues. MTB focused on maintaining liquidity, which helped us stay stable during the sector-wide crisis," he added.  

Dutch-Bangla Bank experienced a nearly 10% deposit growth last year, compared to 7.9% the previous year.  

The bank maintained consistent deposit growth during the crisis, thanks to its strong reputation and service quality, according to Abul Kashem Md Shirin, managing director of Dutch-Bangla Bank.  

He said during the student protests, the bank continued refilling its ATMs and providing other services. Additionally, the bank benefits from a high volume of low-cost current account deposits, as customers prefer its extensive network.

Why excess liquidity is at a record high despite lowest deposit growth  

Excess liquidity in the banking sector increased by Tk51,000 crore last year, the highest in recent history, compared to Tk17,500 crore the previous year, according to central bank data.  By the end of December, total excess liquidity in the sector stood at Tk2.14 lakh crore.  

This surge in excess liquidity occurred despite a severe liquidity crisis and historic low deposit growth in the banking sector. The increase was driven by banks with good liquidity investing in government treasury bonds and bills instead of lending to the private sector.  

Banks preferred government instruments due to their high yield while remaining cautious about private sector lending amid political unrest and high interest rates. As a result, private sector credit growth dropped to 7.3% in December, well below the monetary target of 9.88%.  

Investment in government treasury bills and bonds is included in the calculation of excess liquidity. As a result, excess liquidity increased significantly despite the overall liquidity crisis in the banking sector.  

Conventional private commercial banks were the primary contributors to the rise in excess liquidity due to their investments in treasury bills and bonds. According to central bank data, private banks accounted for over 50%, or more than Tk1 lakh crore, of the total excess liquidity last year.  

The low deposit growth has raised concerns at the Bangladesh Bank, as it has slowed private sector credit growth, negatively impacting employment generation.  

In its latest monetary policy for January-June 2025, the Bangladesh Bank cited slow deposit growth as one of the key factors behind the liquidity crisis some banks are facing.