Bankers exasperate over deposit-stock depletion as bank-merger panic and treasuries bait drive away depositors and investors, leaving some of the lenders high and dry, sources say.
The trend again leads to a rise in the volume of mattress money or currency outside the banking channel, official data showed.
As a spillover effect, the volume of un-invested cash or cashable credits in the bank vaults kept dropping, which becomes a matter of concerns to the liquidity-hungry banks that have to borrow costly funds to run clientele service.
According to statistics of Bangladesh Bank (BB), the country's central bank, the deposit outflow from the banking system kept declining gradually since June 2023 through the first four months of the current fiscal year (FY'24) in a much-cherished respite to the commercial lenders from liquidity tightness.
Since the month of November, the flow has shown a reverse course with the volume of currency outside bank vaults bloating by around Tk 25 billion to Tk 2.48 trillion from October's count of Tk 2.45 trillion.
The figures in the subsequent months were Tk 2.55 trillion, Tk 2.57 trillion and Tk 2.58 trillion in December, January and February respectively. But the major jump in the volume of deposit outflows recorded in March when the merger-related developments in banking realms started hitting media headlines as the figure swelled by Tk 36.21 billion to Tk 2.61 trillion.
Seeking anonymity, a BB official said despite gradual rise in recent months, the latest volume of deposit outflows from banks is still lower on a year-on-year basis as the figure was recorded at Tk 2.55 trillion in March 2023.
About the reasons behind significant rise in deposit outflows in March, the central banker said various factors might have been involved in the growing outflow of credits from vaults like inflationary burden and Ramadan when many people take away their deposits for meeting Eid-related binge.
At the same time, the merger thing started happening in the banking sector, which also caused panic withdrawal from the industry to some extent. "These are probably the reasons behind the rise and it is impacting cashable credits in vaults," the official said.
The central bank's data also showed the volume of un-invested credits in vaults as around Tk 200 billion in December 2023. Afterwards, it dropped to Tk 76.43 billion and Tk 55.81 billion in February and March of this year respectively.
The top executive of a private commercial bank, who preferred not to be quoted by name, said merger issues sent a wave of panic to many of the depositors because of various media reports regarding the amalgamation in banking sector.
"In March, we saw growing deposit outflow from banks, especially from those planned to be merged. This is a key reason," he said.
Managing director and CEO of Dhaka Bank PLC Emranul Huq says because of higher returns, many institutional and individual investors in banks have already started diverting their funds into government treasuries-treasury bills and bonds.
"This could be a major reason behind the rise in currency outside the banks," the experienced banker says.
Alongside merger-driven deposit outflow, Policy Exchange of Bangladesh chairman Dr M Masrur Reaz finds higher-inflation regime as another factor although the rate of inflation officially dropped to 9.74 per cent in April.
"But the price of commodities in the market does not indicate any fall. So, people might withdraw deposits for their living," says the economist about the financial and economic arithmetic of deposit flight.
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