Bank deposits up, private borrowing down contrarily

Bank deposits in the country continue to grow largely amid lesser demand for credits by the private sector, in what is seen as a sign of lower investments.
Officials and bankers said the liquidity situation in the commercial banks continued improving amid positive growth in deposits, but borrowing by businesses was lesser on the contrary.
Because of the slow but steady improvement, the borrowing by the scheduled banks from Bangladesh Bank (BB), the country's central bank, has plummeted. And it gives some sort of respite for the banks after the liquidity stress following panic withdrawal of cash from the lenders' vaults in the aftermath of some reported massive loan-related scams.
According to the latest statistics with the BB, the total deposit liabilities, excluding interbank items, of the scheduled banks increased by Tk 250.52 billion or 1.58 per cent to Tk16.13 trillion during the first quarter (January-March) of this calendar year.
In the previous quarter (October-December in 2022), the deposits with the banks increased by Tk 116.39 while the volume of enhanced deposits amounting to Tk 24.23 billion was recorded in January-March quarter in 2022.
Seeking anonymity, a BB official said the increase in deposits during the first quarter of this calendar year was due to "significant increase in urban deposits".
Citing official data, the central banker said the urban deposits had gone up by Tk192.55 billion in the first three months of this year to reach around Tk12.70 trillion, which accounts for 78.73 per cent of the entire deposit portfolio in the banking sector.
The volume of rural deposits went up by Tk 57.97 billion to Tk 3.43 trillion at the end of March 2023.
On the other hand, the BB official said, the central bank over the last one year backed the banks with huge liquidity support helping them to get over the crisis time. And the result was obvious: the borrowing of the banks from the BB dropped significantly in recent times.
According to the BB data, the scheduled banks' borrowings from the central bank at the end of the quarter under review decreased by Tk 82.88 billion or 6.88 per cent to Tk 1.12 trillion. In the previous quarter, the amount was Tk 1.20 trillion.
Talking to the FE, managing director and chief executive officer of Pubali Bank Limited Mohammad Ali said the liquidity situation kept improving in recent times mainly because of positive growth in deposits and falling demand for credits by the private sector.
"The volume of deposits of our bank increased by Tk 60 billion in the first six months of this year as both individual and institutional depositors are returning to the bank counters riding on the higher rates the banks are now offering," he said.
Contacted, managing director and chief executive officer of Mutual Trust Bank (MTB) Limited Syed Mahbubur Rahman said the banks were now offering rates as high as 8.50 per cent, which means there is a demand for deposits on part of the banks.
"The deposits are increasing, but pressure for credits from the private sector is coming down, which we can see from data published by BB," he adds, indicating situation with business and industry.
"It means the economic activities are slowing down, which is not a good sign for the economy. If we cannot expand our credit lending, it will hamper profitability of the banks as this is one of our core activities," he notes.
Private-sector-credit growth dropped to 10.57 per cent in June compared to the corresponding month last year, according to the central bank statistics.

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