The Bangladesh Association of Banks (BAB), an association of private bank entrepreneurs, has requested that the proposed budget increase in excise duty on bank deposits be withdrawn. The request was made BAB Chairman in a letter to the finance minister on the official pad of the organization.
The letter, signed by Nazrul Islam Majumder, said depositors would turn away from the bank if the proposed excise duty rate was implemented. On the one hand, banks will face a crisis of funds, on the other hand, depositors who rely on interest on deposits are no alternative
Encourage investment in the banking sector. In this situation, he requested to reconsider the imposition of excise duty at the new rate in the greater interest of the depositors and to maintain the balance of the banking system. Copies of the letter have also been given to the Finance Secretary, Governor of Bangladesh Bank and Chairman of the National Board of Revenue.
The finance minister has proposed to increase excise duty from 20 to 60 per cent on bank accounts with a turnover of more than Tk 10 lakh a year. This proposal was made in the proposed budget of 20-21 financial year. The issue has been criticized since the proposal to increase excise duty in the budget.
Consumers see the increase in excise duty on money deposited in banks and transactions as a penalties. On the other hand, bankers say that if excise duty is increased, people will be discouraged from transacting in banking channels.
People will keep money in their houses without leaving it in the bank. This will multiply the existing liquidity crisis in the country’s banking sector.
The letter said depositors’ savings or deposits were considered a bloodbath in the banking system. As a financial intermediary, the bank conducts its activities through investments in accordance with the rules from the collected deposits. So deposits are the main driving force of the banking system.
It said the accumulation capacity and propensity of ordinary depositors has already declined at a significant rate due to the ongoing Corona epidemic. On the other hand, as per the instructions of the central bank, the interest rate on all types of loans has been increased to 9 percent from April 1.
Banks have been forced to reduce interest rates on deposits at a significant rate in order to reduce the cost of funds due to lower interest rates Many ordinary depositors depend on the interest or profit earned against their deposits deposited in the bank. Therefore, it is feared that if the excise duty is increased, the depositors will turn away from the bank.
On the other hand, due to the decline in business turnover, the current flow of deposits has decreased by 20 to 30 percent. In this situation, if the proposed excise duty rate is implemented, the organization thinks that the depositors will turn away from the bank. Highlighting the issue, the BAB said a rise in excise duty would put banks in a financial crisis on the one hand, and deposit-dependent depositors would be encouraged to invest in an alternative non-banking sector on the other.