Deposit growth dips to 7.89pc in February amid inflation, low confidence in banks

After climbing above the 8 percent mark in January, deposit growth in Bangladesh's banking sector has slipped below the threshold again.

At the end of February in the fiscal year 2024-25, deposit growth stood at 7.89 percent, down from 8.28 percent the previous month, according to a Bangladesh Bank report published on Wednesday.

The total volume of deposits reached Tk 17.92 trillion, compared with Tk 16.61 trillion in February 2024.

In January, the total deposit amount was Tk 17.81 trillion.

Bangladesh Bank’s updated report shows that since September in the current fiscal year, deposit growth had been declining, falling to 7.26 percent in that month.

It saw a slight increase to 7.28 percent in October, rose to 7.46 percent in November, and reached 7.44 percent in December.

The last time such low deposit growth was recorded was in February 2023, when the rate fell to 6.86 percent.

Sheikh Mohammad Maroof, managing director of Dhaka Bank, attributed the slower growth to rising inflation.

"Deposits are usually made with surplus funds at the end of the month. But due to increased expenditure under inflationary pressure, people are unable to save,” he told bdnews24.com.

Currently, inflation in the country remains above 9 percent, while interest rates on bank deposits range from 9 to 12 percent.

According to data from the Bangladesh Bureau of Statistics, overall inflation rose to 9.35 percent in March, up slightly from 9.32 percent in February.

In January, it was 9.94 percent.

A senior official of Bangladesh Bank also cited declining public confidence in banks as a major reason for the drop in deposits.

“Many people are not keeping money in banks due to lack of trust,” the official said.

Before the fall of the Awami League government on Aug 5 amid mass protests, the economy had already been under stress from the dollar crisis, dwindling reserves, and declining remittances.

Though the interim government has taken initiatives to stabilise the economy, growth momentum is yet to return.

Amid widespread violence and disorder in August, the month of regime change, Bangladesh Bank had reported a sharp 9.5 percent growth in deposits.

Before that, growth had been below 10 percent in October 2023 at 9.8 percent.

The Bangladesh Bank official added that rumours about the shutdown of Islamic banks after the fall of the government led to mass withdrawals by depositors, which pushed those banks into crisis.

“To cope, those banks initially borrowed from other banks. When the situation worsened, they turned to the central bank for support,” he said.