Eastern Bank Limited provides an annual interest of 3 per cent to those who make deposits at this private bank but it gave 36 per cent dividend to those invested in its shares.
The deposit rate of Dutch-Bangla Bank is 3 per cent while its shareholders have received 30 per cent in dividends. Depositors receive 2 or 3 per cent interest at Trust Bank but the bank’s shareholders received a 20 per cent dividend.
Likewise, deposit rates of all banks have dropped to more or less 5 per cent while shareholders are getting high dividends. As a result, the bank entrepreneurs and directors are pocketing more money.
It is true that investors take a risk pouring money into shares. They buy shares at a price several times more than the Tk 10 base price. The deposit rate is never taken into consideration for shareholders’ dividends. However, Bangladesh Bank raised the question on depositors coming to their benefit and set a minimum limit of the deposit rate.
Former economist of Bangladesh Bank Mustafa K Mujeri told Prothom Alo depositors are the banks’ weakest party. That’s why there is no discussion even after deposit rates decreased to 2 per cent. Depositors are bearing the burden of incapacity and irregularities the although bank’ shareholders and directors should bear this responsibility. The state of the banking sector was never good and urgent reforms are necessary. Otherwise, banking sector will be affected in the long run, he added.
Mustafa K Mujeri further said, “Small depositors can’t go anywhere. Inflation is also not be controlled by the interest. So, the initiative of Bangladesh Bank to fix the deposit rate apparently seems good. It’s necessary to limit the profit received by banks’ directors. However, placing interest rate on the market is better because controlling the rate will backfire.”
Last April, Bangladesh Bank set the maximum limit of lending rate at 9 per cent. But the banks started reducing deposit rate before that. The coronavirus pandemic broke out at that time too. Businesses stopped borrowing. Banks saw a rise in deposits since people avoided spending. Remittance also increased.
As a result, several banks had reduced their three-month deposit rate to 1 per cent. BRAC Bank gave 1 or 2 per cent interest on three-month deposit in last July. Amid this circumstance, Bangladesh Bank set minimum limit of the bank deposit rate last week stating interest of term deposit would not be lower than the inflation and only general depositor would enjoy this privilege.
Speaking to Prothom Alo, Sirajul Islam, executive director and spokesperson of Bangladesh Bank, said, “Inflation can’t be tackled with depositors’ money, let alone an additional profit. Actual money is decreasing too. That’s why central bank has stepped forward to fix the bank deposit rate and banks must follow it.”
Sources said several banks have been lending at a rate of 6 per cent although the maximum limit of lending rate is 9 per cent. Interest rate of the three-month term deposit was less than 4 per cent at 17 private banks at the end of July this year.
These banks are Al-Arafah Islami Bank, Bank Asia, BRAC Bank, Dhaka Bank, Dutch-Bangla Bank, Eastern Bank, Islami Bank, Jamuna Bank, Mercantile Bank, Mutual Trust Bank, NCC Bank, One Bank, Prime Bank, Shahjalal Islami Bank, Southeast Bank, The City Bank and Trust Bank.
Yet, these banks announced dividend 10 to 35 per cent for shareholders with mostly giving 15 to 25 per cent dividend.
Arfan Ali, managing director of Bank Asia, said, “Previously, general depositors incurred lost and businesses gained benefit due to cutting down the loan interest rate. If interest for businesses increases a bit for now, general depositors would be benefited. As a result, money of the affluent would go to depositors’ pocket. A certain group will pocket the money always and it’s normal.”
* This report appeared in the print and online edition of Prothom Alo and has been rewritten in English by Hasanul Banna