Deposit interest shouldn’t go below inflation rate: Bangladesh Bank

August 9, 2021

Bangladesh Bank (BB) yesterday asked banks not to set interest rates on fixed term deposits below the inflation rate as it yields negative returns for savers.
The central bank issued a circular in this regard addressing the managing directors and chief executive officers of all banks. Addressing the decreasing interest rates in banks, the circular said that lots of people are dependent on the interest rate for their deposits in banks.
“The purchasing power of the depositors are also decreasing due to the interest rates being lower than inflation,” the circular said.
It also added that due to lower interest rates, depositors are losing interest in investing in banks and are investing in risky unproductive sectors.
The central bank also made a forecast that the lower interest rates may have a negative impact on the future deposits of the banks and imbalance the liability-asset management as well.
According to Bangladesh Bank (BB) and Bangladesh Bureau of Statistics (BBS), the average interest rate on bank deposits in June’21 was only 4.1%, while the average inflation rate in the same month was 5.56%.
People have been turning to savings certificates as an alternative. AB Mirza Azizul Islam, economist and financial adviser to the former caretaker government told Dhaka Tribune last week that savings certificates are providing a better investment option than bank deposits to the investors amid the pandemic.
“Our banks implement an interest rate of 6% on savings accounts, which is actually a little over 5%. It is also logical that the record remittance figures spur people to put their money on something viable in the long run, as a significant part of the population invest their hard-earned money on savings certificates, as it still provides viable profits to run their families,” he said.
The net sales of savings certificates in 2020-21 fiscal year (FY) was Tk37,386 crore, almost three times more than the previous 2019-20 FY.

-With input

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