October 25, 2020, 11:40 am


ALIF

Published:
2020-09-24 10:43:55 BdST

Rate cut lowers Q2 fixed deposits


The volume of fixed deposits with the banking system fell by 2.41 per cent in the second quarter ending in June compared to January-March, dwindled by lower interest rate.

The amount of fixed deposits decreased by Tk 139.4 billion to Tk 5.67 trillion in the three months to June compared with the preceding quarter.

The volume of savings deposits, on the other hand, grew by nearly 9.0 percent to Tk 2.7 trillion in April-June period over January-March.

The current share of fixed deposit to total deposits is nearly 45 percent while savings accounts belong to over 21 percent.

The deposits of current and cash accounts also expanded by nearly 11 per cent during the period compared with the negative growth of the same in January-March.

The official statistics came in the latest publication of the central bank.

In the meantime, bankers say that the fall in interest rate was the key reason behind the drop in the fixed deposit with the banking system.

Currently, the rate of interest on the fixed deposit is around 6.0 percent, almost half than that of the offered by banks.

The bankers said many are now investing in the capital market or other alternative instruments as the time deposit is no more lucrative to many.

They also said bankers now focus on the savings and current accounts as a means of minimising their liabilities.

Ali Reza Iftekhar, chairman at the Association of Bankers Bangladesh, said that the FDR volume fell due to the cut in interest rates.

He said the money is now stuck with the savings and current accounts as the clients are in a dilemma over whether they will again deposit it with the time deposit or not.

"The clients are now in a dilemma over whether they will deposit again as the FDR or not," he said.

Mr. Iftekhar, also managing director and CEO at the Eastern Bank Limited, said such situations were rightly reflected in the savings and the current accounts as the resources remained with such accounts.

Syed Mahbubur Rahman, managing director and CEO at the Mutual Trust Bank (MTB), said that bankers are now focusing on the savings and other short term deposits instead of time deposits.

He also said another key reason for an increase in the savings is the rise in remittances in recent months.

"There was a huge inflow of remittances in recent months leading to the rise in the overall volume of savings accounts."

However, the share of private sector deposits was 80.99 percent while the public sector deposits accounted for 19.01 at the end of April-June, 2020.

Private sector deposits increased by 4.80 percent at the end of the quarter under review as compared to the preceding quarter (Jan.-Mar., 2020).

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