The effect of inflation rate on deposits: a study on One Bank PLC

Abstract

This report analyzes the effect of the inflation rate on bank deposits and examines how changes in inflation influence deposit growth and depositors’ saving behavior. Inflation is a significant macroeconomic factor that affects the purchasing power of money and the real return on bank deposits. When inflation rises faster than deposit interest rates, real interest rates decline, which can discourage savings and reduce deposit growth in real terms. The study is based primarily on secondary data collected from central bank publications, economic reports, and banking statistics. Basic analytical tools such as trend analysis and correlation analysis were used to identify the relationship between inflation rates and deposit trends over a selected period. Practical insights gained during the internship also contributed to a better understanding of deposit operations and customer behavior. The findings of the study indicate that higher inflation generally has a negative impact on deposit growth and encourages a shift from long-term deposits to short-term or more liquid deposit instruments. However, the report also finds that effective interest rate management, competitive deposit products, and improved banking services can help reduce the adverse effects of inflation on deposits. In conclusion, the report highlights that inflation plays a crucial role in deposit mobilization in the banking sector. Understanding the relationship between inflation and deposits is important for bank management and policymakers in designing appropriate interest rate policies and deposit strategies to maintain deposit growth during inflationary periods.