Interest rise begins luring money back into bank vaults as Bangladesh's banking system attracted Tk 275.64 billion during July-April period of this passing fiscal, despite higher inflation, sources say.
This is almost an inverse course from Tk 269.24 billion having been outside the banking system during the same period a year before (2022-23).
As of April last, the total currency volume outside the banks was recorded at Tk 2.64 trillion. It was Tk 2.92 trillion (approximately) in June 2023.
Central bankers say the money is coming back as the rates of interest on the deposits are on the rise.
"We've taken numerous measures to lure the depositors including raising their confidence level, resulting in the rise of deposits," said one senior official of the Bangladesh Bank.
The volume of currency outside the banking sector of Bangladesh has been increasing since November, giving a lie to higher inflation and the erosion of confidence among people in some banks.
January elections and Eid-ul-Fitr also contributed to the growing volume of money outside the banking system during the period.
However, as of April last, the currency in circulation was Tk 2.9 trillion or down by Tk 211.34 billion. This is down as the Bangladesh Bank has been pursuing a contractionary monetary policy to tame the higher inflation on the economy.
A Bangladesh Bank publication reads deposits of the banking system increased substantially at the end of April 2024, resulting in a fall in the currency outside banks (CoB) compared to their levels in June 2023.
"The rising interest rates might have propelled this rise in deposits during the period."
But economists are of the view that the overall growth in deposits remained alarming as year-on-year growth up to March was recorded 9.25 per cent.
"The deposit growth remained around 9.0 per cent over the past one year--and this is alarming," said Dr Ahsan H. Mansur, executive director of the Policy Research Institute of Bangladesh or PRI.
He notes that still Tk 2.64 trillion remains outside the banking system. It was Tk 2.36 trillion in June in 2022.
In the meantime, the time deposits grew to Tk 14.93 trillion in the banking system--up by 966.23 billion--during the July-April period of this fiscal year. The volume of demand deposits, however, decreased to Tk 1.9 trillion in decreases by Tk 93.95 billion during the same period.
jasimharoon@yahoo.com