Staff Correspondent:

The country’s banking sector recorded deposit growth of less than 8% in June, despite an increase in remittance inflows, as inflationary pressures, sluggish private investment, and weak job creation continue to weigh on people’s savings capacity.

According to Bangladesh Bank data, total deposits in the banking sector stood at Tk18.78 lakh crore as of the end of June 2025, marking a 7.77% year-on-year increase.

The growth was only slightly higher than May’s 7.73%. In contrast, deposit growth in June 2024 had been 9.25%, before entering a persistent downward trend. The lowest growth in the past 18 months was recorded in August 2024 at just 7.02%. Although growth picked up slightly in early 2025, it turned downward again from April.

Senior bankers note that deposits typically rise when inflation eases. However, despite a modest decline in inflation in recent months, stagnant investment and job creation have prevented incomes from rising, curbing people’s ability to save.

Bangladesh’s inflation edged up to 8.55% in July, breaking a three-month easing streak, driven by simultaneous hikes in both food and non-food prices, according to the Bangladesh Bureau of Statistics (BBS).

Before the latest uptick, inflation had steadily declined – from 9.35% in March to 9.17% in April, 9.05% in May, and 8.48% in June. The inflation rate in July 2024 was 11.66%.

Meanwhile, the central bank set a target of containing inflation within the 6.5% ceiling for FY26.

According to the Bangladesh Bank data, private sector credit growth recorded a mere 6.40% in June, a level not seen in recent years.

This marks the second time this year that credit growth has fallen below 7%, consistently hovering around that figure without exceeding it in any month.

“The poor have virtually no capacity to save under the current circumstances,” said Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank. “Food inflation is hitting low-income groups hardest. Rice prices have remained high for over a year, and as poor households spend a large share of their income on rice, saving has become extremely difficult. Many are even breaking into their existing deposits to survive.”

According to him, weak economic activity is limiting job creation, further weighing on deposit growth. The Eid festival in early June also prompted many to withdraw savings, denting growth.

“Although remittances and exports have shown positive growth, wages are not rising in line with inflation. As a result, savings are stagnating despite increased foreign exchange inflows,” said Mahbubur.

Bankers also point to shaken public confidence in the sector. Reports of loan irregularities and weak banks struggling to repay depositors have undermined trust. Since taking office in August 2024, Bangladesh Bank Governor Ahsan H Mansur has initiated reforms, including the restructuring of at least 13 bank boards, liquidity support, and measures to curb anonymous loans. While these steps have prevented further deterioration, depositors’ concerns persist.

CURRENCY OUTSIDE BANKS ON THE RISE

Meanwhile, money held outside the banking system continues to grow. At the end of June 2025, currency in circulation outside banks reached Tk2.96 lakh crore, marking a 2.02% year-on-year increase from Tk2.90 lakh crore.

Economists say this trend is harmful to the economy as it slows down money circulation, which in turn reduces money creation. The return of this cash to banks improves their liquidity and increases the amount of loanable funds available for investment.

Syed Mahbubur Rahman noted that a large portion of the cash held outside the banks is likely “illicit money,” while inflation also contributes to the trend.

Central bank data shows that currency outside banks has steadily risen since October 2023, when it stood at Tk2.46 lakh crore, in tandem with mounting inflationary pressures.