Deposits in expat savings accounts rise, yet far behind expectations

Infograph: TBS

Deposits by expatriate Bangladeshis in local banks picked up slightly in the last one year after remaining in a downward trend for two years despite several banks not introducing any separate savings schemes for expatriates following the Bangladesh Bank's directive two years ago.

According to the central bank, deposits in the savings accounts of expatriates have increased by about Tk1,000 crore in a year till this September. 

But, an analysis of the last few years' data shows that deposits by wage earners have rather seen negative growth.

At the end of September 2018, remitters had savings deposits of Tk3,536 crore. After a slight increase in 2019, deposits declined for the next two consecutive years.

Bankers have told The Business Standard that the trend in deposits by expatriates does not match the authorities' expectations with which they allowed banks to introduce deposit schemes in taka for non-resident Bangladeshis – a move aimed at encouraging the expatriates working abroad to save money and invest in Bangladesh 

Most expatriates have a low propensity to save, they usually send remittances to cover the expenses of their family in Bangladesh, they observed. Besides, there are expatriates who instead of depositing remittance money are more inclined to invest in fixed assets such as buying land and constructing buildings, they added.

And those who want to make deposits in banks choose banks based on familiarity and acceptability, which is why the new banks are lagging behind their older and more reputed peers in receiving deposits from the expatriates, the bankers observed.

Apart from this, a reduction in interest rates and other benefits have made expatriate investors less interested in making new investments in the three bonds introduced for expatriates by the Department of National Savings, investors have said.

On 9 August 2020, the central bank through a notification directed banks to launch new savings schemes for expatriates for a period of one year or more.

The notification stated that apart from authorised dealer (AD) branches – licensed to sell and buy foreign currencies, non-authorised bank branches providing remittance delivery services can also maintain the accounts.

In order to encourage expatriates to open these accounts, the central bank asked for offering interest at competitive rates on the savings schemes.

Previously, expatriates could maintain foreign currency accounts and non-resident taka accounts in Bangladesh, and invest in bonds. But there was no opportunity for them to deposit money in any savings scheme.

TBS, however, has found that at least eight locally-owned scheduled banks have not yet introduced any dedicated savings scheme for expatriates.

Savings packages in different banks

Even if most banks have performed somewhat poorly in attracting deposits from expatriates, some private banks have been quite successful in this regard.

Among them, Mutual Trust Bank has launched three savings packages for expatriates – NRB savings accounts, NRB DPS (deposit plus scheme) with five-year and 10-year terms, and FDR (fixed deposit receipt).

FDRs with one-month to one-year terms can be auto-renewed by the customers.

Besides, the bank is also offering up to 80% loan facility to expatriates against DPS deposits.

Another private sector lender, Midland Bank has introduced MDB Saalam Probashi Savings Account under its Islamic Banking Deposit Scheme.

An expatriate Bangladeshi can open this account by depositing Tk10,000. If the daily balance is more than Tk5000, daily profit is calculated and total profit is shared twice a year.

Besides, the bank has another package called "MDB Digital Probashi Savings". An expatriate can open this account online anytime while staying abroad using his passport. Also they can do transactions through internet banking.

In Islami Bank, expatriates can deposit foreign currency by opening a Mudaraba foreign currency deposit account. A minimum deposit of $1,000 is required to open this account. Besides, under the Mudaraba NRB Savings Bond scheme, an expatriate can invest Tk25,000 to Tk10 lakh in bonds with a tenure ranging from five years to 10 years.

Some other banks, including state-owned Sonali Bank, Janata Bank, Agrani Bank, and private-sector United Commercial Bank, and Modhumoti Bank also have announced savings packages for expatriates and are accepting deposits from their remittances.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, told TBS, "We have introduced several packages because we have had a good response from customers.

"Many banks could not have predicted that remittances would increase in this way. As a result, they could not build their networks that way. As we have had a wide network, we have been able to bring remitters under savings deposit schemes."

He also stated that it is possible to increase expatriates' savings by encouraging them.

NRB banks lagging in receiving deposits

In 2012, the central bank approved three NRB banks – NRB Commercial Bank, NRB Bank, and  Global Islami Bank, initiated by some expatriate Bangladeshis, in a bid to increase foreign exchange supply and attract foreign investment.

Although the banks launched operations in 2013, they are not much active in opening savings packages for expatriates, and even bringing in remittances.

NRB Commercial Bank launched a savings package for remitters, named "Prabashir Hashi". It has been learned that even after two years of the launch of this package, the bank has hardly received any deposits, while the number of accounts opened is also negligible.

This TBS correspondent recently browsed NRB commercial bank's website, but did not find any separate savings package for expatriates.

Meanwhile, expatriates can open a Mudaraba My NRB Savings account in NRB Bank by depositing Tk1,000. The bank has also introduced a monthly savings scheme named "NRB Horizon" under which an expatriate can deposit a minimum of Tk500 and a maximum of Tk20,000 per month for a period of one year, three years,  five years, seven years, or 10 years.

NRB Horizon customers can avail of the overdraft loan facility after six months of regular payment.

Global Islami Bank also has opened a savings package for expatriates. Expatriates can open a Mudaraba Swadesh Savings Account in the bank by depositing Tk1,000. Besides, they can take Bai-Muajjal Utshaho Investment ranging from Tk1 lakh to Tk1 crore.

People who are cognisant of the country's banking sector told TBS that the banks founded by NRBs are not interested in bringing in remittances mainly because their distribution channel is not as wide as that of other large banks. Besides, many of them do not have direct contracts with foreign exchange houses. As a result, they have to make an agreement with other banks to bring remittances.

For all these reasons, the NRB banks post lesser remittance receipts, and, naturally, the number of deposit accounts opened by the remitters in these banks is also small.

When asked about this, Mamoon Mahmood Shah, managing director and CEO of NRB Bank Limited, told TBS that they were working in various ways to increase remittance receipts.

"For the last 4/5 months, we have been carrying out door-to-door campaigns. Remitters through their family are being encouraged to send remittances through legal channels. Besides, the remitters are also being advised to deposit money in savings schemes for their future security. Thanks to these steps, we are now getting decent deposits in the expatriate savings schemes."

Reduced benefits deter investment in bonds

The Wage Earner Development Bond (WEDB) was introduced for expatriates in 1981. Encouraged by its success, two more bonds named US Dollar Investment Bond (UDIB) and US Dollar Premium Bond (UDPB) were launched later.

Initially, expatriates invested in these bonds because interest rates on these bonds were higher than that of other foreign banks and there were many other advantages of investing in bonds.

However, various government steps including lowering the interest rate and limiting investment have discouraged expatriates from investing in bonds, said investors.

The government also has realised that NRB investment in bonds is decreasing due to various obstacles.

Barrister Anisul Islam Mahmud, chairman of the Parliamentary Standing Committee of the Ministry of Expatriate Welfare and Foreign Affairs, said at an event organised on the occasion of World Migrants Day on 18 December that the limit should be lifted to encourage investment in bonds.

An expatriate CIP on condition of anonymity told TBS that expatriates are reducing investment in these bonds due to reduced interest rates and other benefits.

The interest rate on the bonds has been reduced to almost equal to that offered by many international institutions, he said, adding that expatriates are investing in foreign financial institutions rather than investing dollars at home due to low-interest rates and a lack of security.

He demanded that the interest and other benefits in these be increased, and said, "Expatriate Bangladeshis invest in these bonds unconditionally. If they withdraw these investments, dollars fly out of the country. This disinvestment is one of the reasons for the decline in our country's foreign currency reserves. Besides, new investments are not coming. Sri Lanka is now not getting foreign currency even with 30% interest. And we are letting investment go by lowering interest rates."