Staff Correspondent

The growth in banking sector deposits has remained below 8 percent in the last four months of the outgoing year, with bankers citing high inflation and reduced liquidity as factors.

Updated data released by Bangladesh Bank on Thursday said that deposit growth in December stood at 7.44 percent.

In September 2024, deposit growth was 7.26 percent. In October, it increased slightly to 7.28 percent before jumping up to 7.46 percent in November. Then it decreased again in December.

The last time deposit growth had remained in this range was February 2023, when it stood at 6.86 percent.

The Awami League government fell in the face of a mass movement that continued from July into August last year. Even before that, the economy was facing various crises, including a dollar shortage, falling reserves, and declining remittances.

The interim government has taken various steps to overcome the shocks introduced by the political changeover, but bank deposit growth has not remained robust.

The central bank reported a 9.50 percent growth in bank deposits in August, the month the Awami League government fell, despite widespread violence and unrest.

Before that, the last time deposit growth fell below 10 percent was in October 2023, when it was recorded at 9.80 percent.

According to Bangladesh Bank data, deposits in the banking sector stood around Tk 17.77 trillion in December 2024. The amount was approximately Tk 16.54 trillion in December 2024.

A senior Bangladesh Bank official said that bank deposit growth should usually remain above 10 percent and, in a country like Bangladesh, it should be 12-14 percent.

Mohammad Masum, managing director of Citizens Bank, believes that there are three main reasons for the decline in deposit growth.

“When people have money left over at the end of the month, they deposit it in banks. Currently, we are experiencing high inflation. People’s expenses have increased. There is no extra money left after they meet their household expenses.”

According to data from the Bangladesh Bureau of Statistics, or BBS, the overall inflation rate in December 2024 was 10.89 percent. This means a basket of goods that cost Tk 100 in December 2023 cost on average Tk 110.89 in December 2024.

The overall inflation rate stood at 9.41 percent in December 2023.

After forming the government for a fourth consecutive time in early 2024, the Awami League started working with the ministries of fisheries, agriculture, food, commerce and finance to try and control inflation. It did not work.

The inflation rate, which had remained above 9 percent since January 2024, hit 11.66 percent by the end of July, just as the movement to topple the government reached its peak. It decreased slightly in August to 10.49 percent.

By the time the September inflation figures were released, the Awami League government had fallen and a new interim government had come to power. In September, inflation fell to 9.92 percent, but it crossed into double digits in October.

The chief advisor to the interim government spoke of taking steps to control inflation immediately after taking office. Interest rates were repeatedly raised to rein in the money supply. But the benefits did not materialise in the markets for daily necessities.

Irregularities and corruption in the financial sector were also widely discussed during the Sheikh Hasina government.

Citizens Bank MD Masum said, “There is a lack of confidence in the banking sector. Eight to nine banks are suffering from a liquidity crisis. Customers of these banks are not able to withdraw their money when they ask for it. These banks are not getting deposits.”

“Again, there is public anxiety regarding banks, which is why many have withdrawn their deposits from them. They are not saving their money in banks for the time being.”

Masum also pointed to the high rates for treasury bills and bonds as another reason.

"You can get interest rates of around 12 percent in that sector. Therefore, investment by individuals and institutions has also increased there. Savings have gone into treasury bills and bonds instead of banks."