It is disturbing to follow that deposits and savings in the country’s public and private banks have considerably reduced due to all-pervasive high inflation. At the same time, the country’s central bank continues to go through acute dollar crunch and depleting foreign reserves due to buying US dollars at higher rate.

According to the Bangladesh Bank, it has sold US dollars of around Tk 2 hundred thousand crore in last two years to the public and private banks to meet their demands. Concurrently, it had to pay huge amount of dollars against growing import costs – thus, resulting in a massive dollar crisis at our banks putting pressure on foreign reserves.

However, the sudden steep fall in term deposits has put the entire deposit growth of the banking sector under pressure. And drastic fall in saving certificate sales only reflects how people’s income has been badly hit.

Understandably, our people also had to face numerous challenges in meeting their daily expenses as commodity prices soared, making them less inclined to investing in NSCs. Moreover, liquidity crunch has also made banks cautious in lending causing a slowdown in private sector credit growth.

It comes as no surprise that the net sales of national savings certificates (NSC) turned negative for the first time in the recently concluded financial year 2022-23 amid the government’s discouraging measures on purchasing NSCs. Moreover, repeated incidents of loan anomalies, big scale scams to growing unrecovered default loans have also compelled depositors to withdraw their savings and deposits to a greater extent.

Interestingly enough, deposits increased substantially during the pandemic as people could not spend because of movement restrictions. As a result, excess liquidity hit an all-time high standing at a colossal Tk2.31 lakh crore. Now, people are spending higher amid high inflation causing a fall in savings.

Though the central bank has been providing soft loans based on 4 to 7 percent interest rate, a large number of bankers reportedly claimed that they have to spend between 5 to 8 percent to collect deposits. As a result the banks have been charging from 9 to 11 per cent interests after withdrawing the interest rate limit. Net sales of NSCs in Fiscal years 22-23 were Tk 41,959.54 crore and Tk 14,428 crore respectively.

To finish with, need of the hour for government authorities is to control mounting inflation in the country, or else, depleting deposit and savings scenario will get even worse. To do that restoring people’s trust by offering them lucrative saving schemes is a must.

And with the general elections knocking at the door, it is equally important to ensure political stability while getting engaged in meaningful dialogues among our two major political parties.

Political instability and uncertainty would only invite bigger challenges.