Bank deposit growth slows to 7.7pc in May
Business Report :
Deposit growth in Bangladesh’s banking sector fell to its lowest level in May, despite banks offering attractive interest rates and a recent decline in inflation.
According to the latest data from Bangladesh Bank, total deposits in the banking system reached Tk18.32 lakh crore at the end of May, marking a 7.73 percent year-on-year increase from Tk17 lakh crore in May 2024. This growth, however, represents a continued slowdown from 8.21 percent in April and 8.51 percent in March.
Currently, banks are offering deposit interest rates ranging between 9 and 11 percent, with some liquidity-strapped institutions offering up to 13 percent. However, these higher rates have failed to attract deposits at the expected level.
Experts attribute the sluggish deposit growth to stagnant income levels, despite easing inflation and high deposit rates. They argue that limited investment activity has curbed job creation, leaving household incomes largely unchanged. As a result, the lack of income growth has naturally constrained the ability of individuals to increase their savings.
In addition to the slowdown in deposit accumulation, private sector credit growth also remained below expectations in May, rising just 6.95 percent-well short of the central bank’s annual target of 9.8 percent. Analysts cite political uncertainty, liquidity constraints in the banking sector, and a rising volume of non-performing loans as key factors hampering lending activity.
Compounding concerns, the volume of currency held outside the banking system surged significantly in May. Following a brief dip in April, cash in public hands increased by Tk16,400 crore to reach Tk2.94 lakh crore at the end of May, up from Tk2.77 lakh crore a month earlier. This represents an 8.54 percent year-on-year rise from Tk2.71 lakh crore in May 2024.
Economists have warned that a growing volume of currency outside banks can have negative implications for the economy. Reduced money circulation limits the process of money creation, thereby weakening the financial sector’s ability to support economic activity.