Deposits at banks dipped 1.07 percent in January from a month ago as savers rush to government savings schemes that offer higher interest rates compared to the banking system.

Total deposit at the country's 56 banks was Tk 702,814 crore as of January 29 this year, down by Tk 7,658 crore from Tk 710,472 crore in December 31 last year.

Bankers said banks have been lowering interest rates on deposits for nearly two years due to dull investment situation.

The weighted average interest rate on bank deposits was 7.32 percent in November last year, which was 8.45 percent in the same month a year ago.

Interest rates on term deposits at private banks are as high as 9.50 percent while it is 8.50 percent at state banks.

On the other hand, interest incomes on savings certificates range between 11 percent and 13.50 percent.

“So, the savers are now getting more interested in savings certificates rather than putting money in banks,” said Anis A Khan, managing director of Mutual Trust Bank. 

In the five months to November of the current fiscal year, gross sales of saving instruments went up by a staggering 82 percent compared to the same period a year ago.

Banks have been sitting idle on huge piles of cash for a long time, as they could not make new investments.

Their investment situation worsened further in January because of the blockades and strikes as businesses and companies have put their borrowing plan on hold.

As a result, banks now have more liquidity in their hands and are not interested to take costly deposits, bankers said.

Khondkar Ibrahim Khaled, a former deputy governor of Bangladesh Bank, blamed the decline in banks' deposits on the seasonal effect. He said sometimes bank branches collect “hot deposits” from their existing clients in December to reach their collection target set by their head offices.

“These hot depositors can withdraw their money after December 31,” he said.

In the absence of social safety nets, the government offers higher yields on savings certificates in order to provide an income to limited-income people and elderly citizens, who are highly dependent on such sources of earning.

A number of bankers say the ongoing political unrest, which began on January 6, also hit the deposit growth.

A section of savers are withdrawing their deposits from banks to buy things, in bulk, whose prices might go up in the coming weeks amid growing uncertainty that the present situation, which has disrupted the supply chain, might linger.

There are also a section of savers who use debit cards to withdraw money from their bank accounts when needed. Savers have withdrawn large amount of money from banks, as many ATMs across the country went out of cash in January due to blockades.

The effect of such withdrawal will not be that much significant, said Khan of Mutual Trust Bank.

Bank-wise, deposits at state lenders went down by 1.59 percent in January compared to December, according to statistics from Bangladesh Bank.

The fall is 0.90 percent at private banks, 0.22 percent at foreign banks and 1.38 percent at state-run specialised banks.

The decline in the specialised banks was caused largely by the 3.18 percent decrease in deposit growth at scam-hit BASIC Bank.

Year-on-year deposit growth also slowed in January. It was 12.58 percent in January 29 this year, which was 13.26 percent in December 31 last year.