Banks' mad rush to secure deposit

Even last month, the interest rate on bank deposit was as low as 5 percent. Then, at the beginning of this month, as if on cue, the rate, which was lower than the inflation rate of 6 percent, started creeping up.

The trigger for the sudden hike was the freezing of Tk 51 crore from ONE Bank's current account with the Bangladesh Bank and Tk 25 crore from Premier Bank's for going way past the limit set for loan-deposit ratio.

To avoid the same fate, many banks that were flirting dangerously with the ceiling went on a desperate attempt to secure deposits.

"Some banks that have high loan-deposit ratio are running after deposits to avoid the regulator's punishment," said Abdul Halim Chowdhury, managing director of Pubali Bank.

The ongoing liquidity crisis at Farmers Bank as well as the higher-than-expected private sector credit growth -- over 18 percent -- also made deposits dearer, bankers said.

Private sector credit growth stood at 18.63 percent in October -- way past the monetary ceiling of 16.2 percent set for the second half of this year, according to data from the central bank.

"We see a sudden pressure on deposits as many banks are running after money," said Shafiqul Alam, managing director of Jamuna Bank.

A rise in the demand for funds has pushed banks' interest rate for deposit by 50-200 basis points in recent days.

Top bankers said some lenders are making some last-ditch efforts to show their 2017 report card to be better than how they actually fared during the course of the year.

Take, for instance, the case at Sonali Bank. The state-owned bank yesterday got a request for withdrawal of Tk 185 crore from the Bangladesh Telecommuni-cations Company Ltd.

 The telecom company asked Sonali to transfer the amount to seven private banks: Exim, IFIC, Jamuna, Mercantile, One, Standard and Social Islami.

But Sonali declined to honour the request as withdrawal of such a large amount on the last transaction day of 2017 would have a negative impact on the balance sheet, according to Mallik Abdullah Al Mamun, manager of the Sheraton branch with which the account is registered.

"BTCL can withdraw the amount with seven days' notice as per its agreement with Sonali," said the official of the state-owned bank.

But the telecom company sent the withdrawal notice only yesterday and asked for the transfer to be made on the same day, he said, adding that the state-owned enterprise is doing this at the year end on political pressure.

"This is an unhealthy practice among the private banks to use government deposit just to show a better balance sheet at the year's end," Al Mamun said.