The amount of cash held in banks fixed deposit accounts rallied to an eight-month high of Sh1.53 trillion in March as the economy gradually picks up from the knocks of the Covid-19 pandemic.
Data released by the Central Bank of Kenya also indicates the deposit rate--the rate of return banks offer long-term savers for their cash--also rose to 6.46 per cent in March being an incentive for the cash-rich to save more money.
The amount of cash held in banks fixed deposit accounts rallied to an eight-month high of Sh1.53 trillion in March as the economy gradually picks up from the knocks of the Covid-19 pandemic.
Data released by the Central Bank of Kenya also indicates the deposit rate--the rate of return banks offer long-term savers for their cash--also rose to 6.46 per cent in March being an incentive for the cash-rich to save more money.
“An increase in the rate shows increased appetite for the banks to mobilise funding for onward lending,” said, a source at Kenya Bankers Association.
“When demand for loans is not high, banks prefer not to keep deposits that they are not going to lend, but when loan uptake improves, the ripple effect is that banks will offer more returns for savings,” he added.
This marks a rebound since the long-term deposits, which have now risen for two consecutive months, had fallen by Sh74 billion from an all-time high of Sh1.55 trillion in July last year to Sh1.47 trillion in November as banks cut their need for cash for onward lending.
The increase in deposit rates comes at a time when returns on other investment portfolios preferred by the high net worth individuals have also risen.
For instance, investor wealth at the Nairobi Securities Exchange (NSE) rose to pre-pandemic levels hitting a three-year high of Sh2.63 trillion early last week, gaining Sh300 billion since the beginning of the year.
Land prices in Nairobi also defied the Covid-19 woes to rise by 0.2 per cent in the first quarter of the year, according to Hass Consult research findings.
EIGHT-YEAR LOW
Cash in demand deposit accounts also rose by Sh2 billion at the end of March signalling a slowly improving economy.
Interest on fixed deposits dropped to an eight-year low of 6.3 per cent in December as banks took a cautious approach to extending fresh credit in an environment where companies and individuals sought moratorium on their loans in the wake of the pandemic effects.
As result, banks went slow on lending, reducing the scramble for deposits that put pressure on interest they paid on savings.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
