Prudent policies helped economic revival

18 September, 2020 12:00 AM printer

Savings is a good indicator of economic solvency of a country. People save their surplus income after consumption in various savings instruments in the banks and other financial institutions at home or abroad. When people save their surplus money in the domestic banking institutions, it indicates that they have confidence in the country’s economy and its financial institutions. This is very important for the macro economy of a country, which boosts-up as more and more people invest their savings in the domestic financial institutions. This is mutually beneficial for both the people and the country, as the micro level influences the macro level and vice versa in a country’s economy.

It is reassuring that our economy has been steadily improving normal activities resumed after the countrywide shutdown was withdrawn on May 30. The deposit in banks started increasing since July, indicating that the economy was slowly but surely reviving despite the ongoing pandemic.

Government’s prudent decision to offer an additional two per cent incentive to wage earner’s remittance has also helped to increase the flow of remittance via legal channels, thus adding to the positive growth in domestic bank deposits.

Prudent savers, who prefer risk-free investments, are turning towards banks over other saving options. Previously, the various national savings certificates were more popular with prudent investors, being both risk-free and having higher return. But stricter rules and regulations with regard to national saving certificates was imposed by the government in recent years, resulting in many people opting to save their money in banks as being hassle-free and yet a reliable way to keep their hard-earned money safe.

Another reason for the increase in bank deposits is that though the stock market situation has somewhat improved, investors are not yet ready to speculate during the ongoing pandemic, as restoration of their confidence in the stock market will take more time. Therefore, the investors are turning to banks as a secure investment destination despite the low interest rates. The interest rates of bank deposits have dropped after the implementation of a nine per cent lending rate of bank loans from April 1 this year. But fortunately, the lower rates have not discouraged investors from keeping their hard earned money in banks for safe-keeping. People are seeking security over higher return for their investments.