NBFIs lose 17% of deposit accounts

Deposits at non-bank financial institutions (NBFIs) have slightly increased on an interest rate hike but the number of deposit accounts have dropped sharply, indicating a lack of trust.

The deposits at the NBFIs stood at Tk 44,830 crore at the end of 2023, up from Tk 43,752 crore a year earlier, as per the latest data of Bangladesh Bank.

This means the deposit growth was only 2.46 percent.

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On the other hand, the number of deposit accounts stood at 431,221 last year, down from 521,556 in 2022.

This means there has been a drop of around 17 percent.

The deposit amount has increased as the reputed NBFIs are being able to draw customers for an interest rate hike, said Kanti Kumar Saha, chief executive officer of Alliance Finance.

Both banks and NBFIs are offering high interest rates on their deposit products after the withdrawal of an interest rate cap in June last year.

The number of deposit accounts has decreased for two reasons, said Saha.

One is that some depositors are withdrawing their funds from the NBFIs centring some media reports over the sector's loan irregularities and scams.

The other is that some small depositors are withdrawing their funds because of high inflation.

Inflation in Bangladesh has remained above 9 percent since March last year.

Overall inflation in the country stood at 9.67 percent in February, as per the Bangladesh Bureau of Statistics.

Lower and middle-income people are now suffering to meet their essential needs because of a rise in the prices of food, he added.

The Alliance Finance CEO also said some depositors withdrew their funds from NBFIs and then parked it in banks because the latter are now offering high interest on deposit products.

Owners of small-scale businesses and importers who parked their excess funds in the NBFIs are now withdrawing those, he added.

Md Golam Sarwar Bhuiyan, managing director of the Industrial and Infrastructure Development Finance Company, echoed the same.

He told The Daily Star that the number of deposit accounts has fallen because depositors are withdrawing their funds to meet their needs for essential foods amid high inflation.

He said small depositors are now encashing their savings due to the price rise.

The amount of deposits at NBFIs have increased because the interest is being added to the deposit amount, according to Bhuiyan, who is also chairman of the Bangladesh Leasing and Finance Companies Association.

In Bangladesh, there are 35 NBFIs, including three state-run institutions. Collectively, they have 308 branches.

At the end of December last year, loans and advances in the sector stood at Tk 73,759 crore, up from Tk 70,321 crore a year ago, as per central bank data.