Term deposits in banks surge

Term deposits in banks register a rebound, rising by Tk 189.3 billion to Tk7.8 trillion as of the fourth quarter of 2023, as uncapping interest pays off.
Official statistics show the share of fixed deposits in the total bank deposits is expanding gradually as the interest rates on such deposits are on the rise, alongside their lending rates.
The share of fixed deposits to total deposits in the banking system increased from 44.25 per cent to 44.42 per cent in October-December 2023 as compared to the previous quarter.
The rise in fixed deposits accounted for 2.5 per cent.
Bangladesh has total deposits in the banking system worth Tk 17.5 trillion, as the end of December 2023.
However, the share of savings deposits to total deposits declined from 21.8 per cent on September 30, 2023 to 21.4 per cent on December 31, as there are little interest gains for such depositors.
The aggregate savings deposit is worth Tk 3.7 trillion, according to Bangladesh Bank statistics released recently.
The share of special-notice deposits, which give a small amount of interest, dropped 3.5 per cent to Tk 1.6 trillion.
People familiar with the developments in the banking sector told the FE that the FDR amount marked an increase as the rate of interest is climbing.
They say soon after the introduction of SMART, an interest benchmark for lending in the banking industry, in July 2023, the interest rates on deposits has been rising.
Many banks are offering around 12 per cent on such term deposits.
Emranul Huq, CEO and managing director of Dhaka Bank, a leading private commercial bank in Bangladesh, says the rate on FDR has increased and this is the main reason behind the surge in share of FDR in total deposits.
Currently, many banks offer more than 10 per cent as interest on term deposits and there are few banks having liquidity shortage offer even around 12 per cent on one-year-tenure term deposits, he told the FE.
Mr. Huq feels that the economy is stable despite the fact of inflation rate remaining high. "Many people are now trying to save money amid the high inflation," the banker says.
Syed Mahbubur Rahman, CEO and managing director of Mutual Trust Bank, another leading commercial bank, notes that there is competition among banks to raise deposits.
He says banks now motivate their clients to switch to term accounts from savings accounts. Savings accounts provide 2.5 per cent interest.
"There are many savings account holders having few lakhs, and the bank employees motivate them to deposit the amount into FDR," he told The Financial Express about the latest banking trends.
And there are few banks that used to discourage deposits in the past but they are now mobilising deposits.
"Banks need cash for investing in the Treasury bill and bonds which offer very attractive yields," the banker says about a rush for netting money from members of the public who have the means of saving.

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