Deposits in Bangladesh banks slip below 8% again in February

Bank deposits growth had briefly risen to 8.28 percent in January after staying below 8 percent in the four preceding months

Bank deposit growth in Bangladesh has fallen below 8 percent once again in February, reflecting the headwinds facing the economy.

The latest data released by Bangladesh Bank on Wednesday reveals that deposits in the banking sector grew by 7.89 percent in February compared with the same month last year. This marks a decline from January, when growth had briefly risen to 8.28 percent after staying below 8 percent for four consecutive months.

The report shows that deposit growth began falling from September of the current fiscal year, dropping to 7.26 percent that month. It rose slightly to 7.28 percent in October, 7.46 percent in November, and reached 7.44 percent in December.

The last time deposit growth dipped this low was in February 2023, when it stood at 6.86 percent.

Sheikh Mohammad Maruf, managing director of Dhaka Bank, attributed the slowdown to inflation.

"People usually deposit any extra money they have at the end of the month. But with rising living costs, they no longer have that surplus," he said.

Currently, inflation is over 9 percent, while bank deposit interest rates range from 9 percent to 12 percent.

According to the Bangladesh Bureau of Statistics (BBS), overall inflation rose to 9.35 percent, with February recording a rate of 9.32 percent, slightly down from 9.94 percent in January.

A senior official from Bangladesh Bank added that inflation was not the only factor, noting that many people were also losing trust in the banking system.

“There’s a confidence crisis. That’s why some people are choosing not to keep their money in banks,” the official said.

Bangladesh’s economy has been under pressure due to a dollar shortage, depleting foreign reserves, and declining remittance inflows. These issues existed even before the fall of the Awami League government in August last year following a mass uprising.

Despite the political upheaval, Bangladesh Bank reported a 9.5 percent growth in deposits for August. The last time growth stayed below 10 percent was in October 2023, at 9.8 percent.

The central bank official also noted that rumours about Islamic banks shutting down after the government’s fall led to panic withdrawals.

“People lined up to pull out their money. First, these banks borrowed from the interbank market, but when things worsened, they had to turn to Bangladesh Bank for support,” he said.