Plight of bank depositors
At long last the central bank has taken the trouble of taking note of the depositors' plight, in terms of the rates of interest the banks have been offering to the latter in recent months. The depositors have become victims of banks' move to reduce their spread in accordance with the advice coming from the Bangladesh Bank (BB). However, the banks have been found to be more eager to cut the interest rates on deposits than that on credit.
The average deposit rate came down to 5.22 per cent in December last. The rate has been either equivalent or less than the rates of inflation as recorded by the Bangladesh Bureau of Statistics (BBS), the national statistical organisation.
The central bank reportedly issued a circular Tuesday last asking the banks to address the issue of declining deposit rates. It cautioned the banks about possible erosion in their deposit volume if the situation persisted any longer.
The current deposit rates should have prompted the banks' clients for substantial withdrawal because they are either getting zero or negative return on their deposits --both term and savings. But the fact remains that the banks have not experienced such an unpalatable situation. They are rather lucky just because the depositors are helpless under the prevailing circumstances.
The depositors are left with virtually a very limited choice. Either they have to keep their money with banks or invest in government's savings tools that offer relatively attractive yields or listed stocks. There exists cap on investment in savings tools by an individual. In the absence of proper monitoring, 'benami' investments have been taking place in this particular area. This is evident from the investment in savings tools in the first six months overshooting full target for the current financial year.
Another important option for the savers is investment in stocks. That is, unfortunately, found not attractive enough by the savers. No explanation is necessary for a few manipulators with the indulgence from a few key players in the market have caused enough damage to investors' confidence. Many suspect that lately another attempt was made to lure some investors. But the timely warning coming from the central banks, possibly, has saved the situation.
The banks have total deposits valued at over Tk 8.0 trillion. More than 50 per cent of it has been kept with bank as term-deposits and 20 per cent as savings. The economy does not have that much avenues to accommodate such a large fund and offer attractive return on the same.
But the banks can well raise their deposit rates and cut lending rates provided they manage their funds efficiently. The substantial volume of classified loans has become a huge burden on them. They need to reduce their volume of non-performing loans employing all-out efforts. Once they are successful in this otherwise difficult task, the situation will be rather comfortable for them and also for both depositors and borrowers.