Savings of extreme poor halved during pandemic: Bangladesh Bank

Savings of extremely poor people, who opened bank accounts by depositing as little as Tk10, came down by almost half last year, according to a report of the Bangladesh Bank.

Many of the extremely poor people could not deposit money in their "non-frills" accounts due to the decrease in income caused by the Covid-19 outbreak, while many others withdrew their savings to survive through the pandemic.

As a result, their savings in the banks have decreased by about 45% in 2020 compared to that in 2019. However, the number of no-frills accounts has increased by more than 7%.

Meanwhile, the number of accounts and deposits of the beneficiaries under the social security programmes and heroic freedom fighters has increased last year compared to that in 2019.

However, the number of farmers' bank accounts has decreased but the deposits in these accounts have increased. Apart from this, the numbers of other accounts and the amount of deposits have decreased.

This information was obtained from the "Quarterly Report on No-Frill Accounts (October-December 2020)" published by the Bangladesh Bank on Thursday.

The report shows that the number of accounts opened with Tk10, Tk50 or Tk100 (no-frills accounts) increased by 9%, but the deposit amounts in these accounts decreased by 0.6% last year compared to that in 2019.

Customers are choosing government banks to open no-frills accounts. Sonali Bank is on top in terms of the number of accounts and the amount of deposits.

Asked about the no-frills account, Bangladesh Institute of Development Studies Senior Research Fellow Nazneen Ahmed said, "The Covid-19 pandemic has had a major impact on the income of the extremely poor people. But we also have to notice how much they (the poor) use those accounts like us."

"At the same time, the numbers of such accounts and deposits have increased as the government has increased the scope of social programmes and the amount of money given through them to help the poor," she opined.

School students' accounts are also included among the no-frills accounts. Despite the closure of educational institutions during the pandemic, the number of student accounts has increased by 9.79% and deposits by 7.11% in 2020 compared to that in 2019.

According to the report, school banking accounts are mostly opened in urban areas. Most of such accounts and deposits are in Dhaka and Chattogram divisions. The Dutch-Bangla Bank is at the forefront in conducting school banking activities.

Regarding the no-frills accounts, Bangladesh Bank Spokesperson and Executive Director Sirajul Islam told The Business Standard that these accounts are important for the implementation of the government's various social programmes such as assistance in social security, scholarships and subsidy to farmers.

There is a provision to take up to Tk50,000 loan without collateral against such account and up to Tk200 crore with collateral.

The report said the Bangladesh Bank has created a refinance scheme with a revolving fund of Tk200 crore in 2014 to facilitate the rural economic activities of the low-income people. Up to December 2020, 51,605 no-frills accounts have received Tk183.31 crore as loans.

According to the central bank's report, there is a decrease in such loans by 49.59% over the previous quarter and decreased by 54.22% since the last year. The decline in loans disbursement through Tk10 accounts is potentially due to sluggish demand during the Covid-19 pandemic.