An aggressive drive by banks for funds has had a positive effect on deposit growth, easing the prevailing liquidity crisis in the banking system.
Bangladesh Bank data reveals that banks saw a Tk96,259 crore increase in deposits in the 2018-2019 fiscal year. That is 10 percent up from that in the previous fiscal year.
Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh, said deposit growth has increased because banks are offering higher interest rates.
Imposing strict conditions on savings certificates is the main reason for the growth, he added.
"Deposits in a bank are in a delicate condition," says renowned economist Zahid Hussain.
Speaking to The Business Standard, he added that deposit growth is still low.
Bankers and economists have long been calling for cutting interest on savings instruments to stop the use of undisclosed money in a national savings scheme that is meant for pensioners in particular.
In the current fiscal year, the government has put strict terms on buying savings tools, and banks regularly update their clients' information in a database in order to monitor the source of funds.
Investors must submit tax identification numbers while buying savings instruments above Tk1 lakh, and they have to maintain every transaction through bank accounts.
Many people have stopped buying savings certificates and are turning to bank deposits instead to avoid legal complications.
Private commercial banks have launched new schemes with increased interest to attract deposits. However, state-owned and foreign banks are in a comfortable position on this issue.
The new generation of banks are ahead in the deposit collection drive. Banks with low deposits have mainly increased interest rates.
Most private banks have set deposit collection targets for their staff.
Banks, for example, give a target to a mid-level banker to collect Tk10 crore in deposits on an average every year. However, that varies from bank to bank.
The lenders also set a target for their staff as per their position before considering any promotion and pay increment.
Banks also collect deposits over the year using various types of campaigns such as "Baishakhi offer".
At present, almost all banks are facing a cash crunch which is hampering their daily operations. These financial institutions survive on call money – a short-term loan from other banks.
The interest on inter-bank call money rose to 5.07 percent in the last fiscal year, up from 4.52 percent a year earlier.
Meanwhile, banks are not complying with the interest rates fixed at 6 percent on deposits and 9 percent on lending.
Sources at the central bank say that 22 of the 40 private banks in the country are offering 9 percent or higher interest on deposits.
They also say that the new generation of banks such as Padma Bank and NRB Global Bank are offering 11.5 percent interest on deposits.
Central bank data shows that banks received a total of Tk10,65,322 crore in deposits in the last fiscal year, marking a 9.93percent growth from the previous year.
On the other hand, the total lending was Tk11,45,932 crore, marking a 12.04 percent increase.
Dr Fahmida Khatun, executive director at the Centre for Policy Dialogue, a think-tank, said deposits must exceed lending for a sustainable banking system.
She added that the growth in deposits compared to that of in-loan disbursements is not significant.