Banks see growth in deposits of young students

As of December 2024, the total deposits of school students in banks stood at 2,071 crore BDT. In November, the amount was 2,041 crore BDT, indicating an increase of 30 crore BDT within a month. This information comes from the latest report on school banking published by the Bangladesh Bank.

According to the report, at the end of December 2023, the total deposits in school banking accounts were 2,179 crore BDT, meaning that over the course of a year, the deposits have decreased by approximately 108 crore BDT. However, in November, the year-on-year difference was 158 crore BDT, suggesting a slight improvement in December. Additionally, at the beginning of the current fiscal year in July, student deposits amounted to 2,200 crore BDT, which gradually declined to 2,172 crore BDT in August, 2,135 crore BDT in September, and 2,087 crore BDT in October. Despite this continuous decline throughout the fiscal year, December saw a slight recovery.

Industry experts believe that the rising inflation in recent months has significantly impacted lower- and middle-income families, making it difficult for many parents to maintain savings in school banking accounts. This has had a direct effect on the deposit amounts. Additionally, after the banking sector turmoil in July and August, a sense of uncertainty and distrust spread across the banking industry, which also affected school banking accounts.

According to the Bangladesh Bureau of Statistics, the cost of education in the country has been steadily increasing, which has influenced students' savings. However, with signs of decreasing inflation, savings are beginning to show a positive trend again, leading to an increase in deposits.

Bankers explain that deposits in any type of account generally grow slightly over time due to the accumulation of interest, even if no new deposits are made. However, if account holders withdraw their accrued interest, the balance remains unchanged. Additionally, new deposits from recently opened accounts contribute to the overall increase. The continuous decline in deposits over the past few months indicates that withdrawals exceeded new deposits, suggesting that students were forced to use their savings due to financial pressure. In December, however, some new accounts were opened, and fresh deposits were added.

According to the Bangladesh Bank report, as of December 2024, the total number of student banking accounts stood at 4,380,159, up from 4,342,259 in November—an increase of 37,900 accounts within a month. In contrast, November saw a decrease of 22,000 accounts compared to the previous month.

Among these accounts, the number of accounts held by male students in December was 2,232,672, while female students held 2,147,887 accounts. In November, male students had 2,205,984 accounts, and female students had 2,136,275 accounts. This means that in December, male student accounts increased by 26,688, and female student accounts increased by 11,212.

Bankers note that withdrawals typically surge at the beginning and end of the year, as families spend on vacations or pay off school dues in November and December. However, the fact that student deposits have consistently declined throughout the year suggests that families are struggling to cover regular expenses, forcing them to withdraw savings. The overall economic situation and high inflation indicate this trend. Despite these challenges, the improvement in December is seen as a positive sign.

Former Chief Economist of Bangladesh Bank, Dr. Mustafa K. Mujeri, stated that a lack of confidence in the banking sector had developed for various reasons, though the situation is gradually improving. This also affected school banking. Now, banks need to raise awareness and encourage more students to participate in the school banking programme.

The School Banking Initiative was launched by Bangladesh Bank in 2010 to promote financial inclusion among students and educate them on financial management. Students were allowed to start saving under this program in 2011, and by the end of its first year, 29,080 school banking accounts had been opened. The number increased to 132,537 by the end of 2012. However, due to the COVID-19 pandemic and the Russia-Ukraine war, the number of student accounts and deposit amounts declined. In response, commercial banks introduced various attractive profit schemes to encourage student savings.

As of now, 59 banks in Bangladesh have implemented school banking programs. Students aged 11 to 17 years can open these accounts, which come with several benefits, including reduced fees and charges, free internet banking services, exemption from minimum balance requirements and low-cost debit card facilities.

A school banking account can be opened with a minimum deposit of just 100 BDT.