Deposits in banks have increased by around Tk74,000 crore in the April-June quarter of this year, which was the highest-ever deposit growth in a single quarter in the country's history.
Bankers and economists said deposits increased after the central bank put new money in circulation by printing taka. Besides, a sluggish pace of investment in the election year also contributed to the increase in deposits.
According to the central bank, the amount of deposits in the banking sector was Tk16.13 lakh crore in the January-March quarter of 2023, which increased by Tk73,962 crore, or 4.59%, to reach Tk16.87 lakh crore at the end of the April-June quarter.
Compared to the end of June 2022, deposits at the end of June 2023 have increased by Tk1.14 lakh crore, or 7.24%.
Bankers said the central bank lent the highest amount to the government in FY23. Most of those loans were made by printing money. Consequently, money circulation in the market increased, which gradually came to the banks as deposits.
They also said bank deposits increased hugely during the April-June quarter of FY23, but deposit growth for the full period of that fiscal year was the lowest in six years.
One of the main reasons for the drop in yearly deposit growth was that many customers withdrew their deposits due to media reports of loan irregularities in several Sharia-based banks, said people involved in this sector.
According to central bank data, the amount of money in circulation at the end of June 2022 was around Tk2.56 lakh crore, which rose by Tk55,765 crore to stand at Tk3.11 lakh crore by the end of June 2023.
According to the central bank report, there has been an increase in deposits of all types of banks during the April-June period of this year.
Deposits in state-owned banks increased by Tk23,300 crore during the April-June quarter of 2023, which was the highest since the beginning of 2021. Currently, these banks hold Tk4.30 lakh crore as deposits.
The growth of deposits in private banks during the April-June period was Tk49,000 crore, and in Islamic banks it was Tk13,000 crore, which was the highest in the last one year.
Currently, private banks have Tk11.32 lakh crore and Islamic banks have Tk3.68 lakh crore in deposits.
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, told TBS that one of the main reasons for the deposit growth is the increased amount of interest on it. Besides, $2.19 billion in remittances came to the country in June 2023 – the highest in FY23, which was added to deposits after being converted into taka.
He also said the new money that the central bank is injecting into the market is also entering the banks as deposits.
Syed Mahbubur Rahman expressed his hope that the increase in deposits amid the liquidity crisis will reduce the overall crisis faced by the country's banking sector.
Agreeing with him, a central bank official told TBS on condition of anonymity that the money injected by the central bank increases manifold after circulation. In the last fiscal year, the central bank increased money circulation massively, which went through the hands of customers and entered the commercial banks, making a positive impact on the financial institutions that have been suffering from the liquidity crisis.
Ahsan H Mansur, executive director of the Policy Research Institute, told TBS that most of the loans that the central bank gave to the government were provided by creating new money. That money has increased severalfold and is entering the banks as deposits.
There was no growth in deposits in the quarters preceding FY23 because the central bank had to sell a lot of dollars amid a greenback crisis. As a result, a lot of money went from the market to the central bank, he added.
The government's bank borrowing marked a historic high in FY23, surpassing the budgetary targets as it had to highly depend on the banking system for financing amid a revenue shortage and a slowdown in the inflow of foreign funds.
The total borrowing from the banking system stood at Tk1.24 lakh crore at the end of June 2023, higher than the borrowing target of Tk1.15 lakh set in the revised budget for FY23.
Of the borrowed figure, 80%, or nearly Tk1 lakh crore, was taken from the Bangladesh Bank.