Painstakingly penny-pinching for a long period, Sakir Hossain Sarker was saving up for his daughter’s marriage from his salary at a private firm. But he has been raiding his savings pot to meet the higher living cost over the past few months.
Having drawn Tk 40,000 over the past months, Sakir in his 50s said he has turned to using his motorcycle for ridesharing service after office to find the money for the extra expenses.
“My salary hasn’t increased. I carry people on my motorcycle now and have Tk 200 or Tk 300 at the end of the day,” he said.
The squeeze began back during the pandemic as many people lost their jobs, the middle-income people in particular. Before they could recover, the citizens were hit by the runaway prices of daily commodities due to the war in Ukraine.
Many others like Sakir are chipping away at their savings or failing to save up altogether as they did before and it is evident in the declining flow of deposits in the banks.
According to the Bangladesh Bank, the year-on-year net deposits have declined by 29 percent from 2020-21 to 2021-22 fiscal year.
In the 2018-19 financial year, the banks reported Tk 962.31 billion in deposits. It rose to Tk 1.16 trillion the following year but COVID-19 emerged in the third quarter.
After the initial wave, the banks saw Tk 1.69 trillion in deposits in the 2020-21 financial year but the figure shrank to Tk 1.2 trillion last year.
The year-on-year growth of net deposits was 45.97 percent in the 2020-21 financial year amid the pandemic.
The savings deposit at the end of June 2021 was Tk 13.51 trillion and rose to Tk 14.71 trillion by June this year. But it dropped to Tk 14.65 trillion a month later in July.
Economist Ahsan H Mansur thinks the Tk 58 billion slide in deposits is “not a good sign.”
“Middle-income and lower-income people save up money in the banks. The prices of daily necessities are much higher than what the government’s official account of average inflation suggests. People are dipping into their savings to make ends meet.”
The chairman of BRAC Bank said the interest rate on bank deposits is lower than inflation now, which may encourage people to move their savings elsewhere to make some profits.
“We’ve heard that many are investing in dollars. We need to look into where the money actually went.”
Bank executives think the slipping deposits may affect the liquidity in the sector, which will in turn reduce the credit flow into the industrial sector. That will make regulating the interest rate a challenge for the banks.
The national bank revealed an account of balance after withdrawal and deposits in banks over the past four years.
The banks collect deposits under different names and in different terms. The central bank said the term deposits, which is used for savings, have seen the most significant decline.
In the 2021-22 financial year, Tk 971.5 billion flowed into term deposits with a 30.41 percent year-on-year decline, whereas, Tk 231.44 went into general deposits registering a 23.26 percent year-on-year drop.
The rising inflation is the major reason behind the surging daily expenses of the people. Zubayer Rahman, a young marketing employee of a private firm, stressed how people with a limited income are struggling to meet family expenses.
He is part of a joint family where he and two of his brothers are jobholders while his father is a retired public servant. The family of 12 has four school-going children. They somehow pulled through with their incomes and the father’s pension until December last year, but the situation now is dire.
“We are forced to spend from our father’s bank savings every month. If this goes on, his savings will run out as well. Where will we get the money if we need medical treatment? Now, I’m looking for a two- or three-hour job to do in the evening.”
Bangladesh Bank spokesperson Md Serajul Islam, however, sees little reason to be so worried.
The flow of deposits has contracted, but the third step of the incentive package has kicked in, he said.
“This will help ramp up economic activities and the small and medium entrepreneurs to stay in business. We’re hoping deposits will grow in the coming days.”
[Writing in English by Syed Mahmud Onindo; Editing by Biswadip Das]