Malaysian banks grapple with slowing deposit growth

Kuala Lumpur

BANK deposits in Malaysia are growing at their slowest pace in more than a decade as retail funds flee to higher-yielding avenues, weakening banks' buffers against any unforeseen funding needs at a time when the economy is losing steam.

Total deposits at commercial banks rose 4.8 per cent in July, the least since September 2002, according to the latest central bank data. Growth is expected to slacken further, with banks offering unattractive interest rates of 3.1 to 4.0 per cent per annum. Those rates are barely above the inflation rate of around 3.0. Most Malaysians still prefer property, equities and other investments than deposits, say analysts.