The growth rate of deposits in the country’s banks fell below 11 per cent in June after remaining above 11 per cent for three consecutive months as many people lost their savings capacity due to the COVID-19-induced economic shocks.
Many people lost their jobs amid the coronavirus outbreak that began in the country in March while another section of people entered into economic hardship as the outbreak of the deadly virus kept the country’s economic activities almost halted for around three months.
People are still struggling to get back to normal life with the rate of infection still remaining high.
Against the backdrop of economic woes, the deposit growth in the country’s banking system dropped to 10.94 per cent in June from 11.28 per cent in the previous month, according to Bangladesh Bank data.
The deposits in the banking sector increased to Tk 11,81,025 crore at the end of June this year from Tk 10,64,536 crore in the same month last year.
At the end of May this year, deposits in the banking sector were Tk 11,57,096 crore.
Bankers said that the fall in deposit growth would ultimately affect the banks’ lending capacity.
The slowdown in deposit growth happened in a time when the country’s banking sector has been going through a major challenge of implementing the government-announced stimulus packages worth around Tk 1.03 lakh crore to revive the country’s economy from the coronavirus fallout.
‘The outbreak of coronavirus has resulted in a severe income erosion of people and many of them are surviving on their previous savings,’ NRB Global Bank managing director Syed Habib Hasnat told New Age, adding, ‘As a result, many people, mostly the middle class segment, are using their bank savings to survive the situation.’
Besides, the demand for cash has reached its peak on the eve of Eid-ul-Azha when people withdraw a huge amount of money to buy sacrificial animals, Habib said.
Asked whether coping with the low deposit flow would be harder for the newer banks than the older ones, he said, ‘Obviously the collection of deposits would be more difficult for the new banks.’
Replying to another question on the stimulus package implementation amid the low deposit growth, Habib said, ‘As per the mode of operation, the banks would be able to lend higher amount when there would be adequate liquidity in its hands.’
‘If the fund flow decreases, the lending capacity of the banks would deteriorate,’ he said.
Besides the lower deposit growth in June, an increase in money outside the banking system also reflected the lower money flow in the banking system.
The BB data showed that the currency outside the banking system in creased by Tk 37,105 crore to Tk 1,93,750.7 crore at the end of May this year from Tk 1,56,600 crore at the end of December, 2019.
The private sector credit growth in May this year dropped to 8.86 per cent against the central bank projection for a 14.8-per cent growth.
Experts attributed the lower private sector credit growth to demand fall.
They said that the liquidity situation in the banking system was not yet that grave due mainly to the central bank’s policy support along with injection of money into the system against the purchase of the US dollar.
In December last year, the deposit growth in the banks was 12.58 per cent. The growth rate was 12.75 per cent and 12.82 per cent in January and February this year.
The rate, however, dropped to 11.07 per cent in March when the pandemic started in the country. In April, it was 11.88 per cent.
Before June, the deposit growth of banks’ was below 11 per cent in July, 2019.
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