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Deposit mobilization and loan distribution are the main products of any bank. Deposit behavior and its impact on loans are very important for any banking operation. The success of a bank depends on the positive deposit behavior and loan recovery situation. Rajshahi Krishi Unnayan Bank (RAKUB) is the largest rural development partner in the agriculture based Northwest region of Bangladesh. The present study examines the deposit behavior of the bank. The study also analyses the impact of deposits on loan disbursement activities of RAKUB. The study is basically analytical and interpretative in nature considering the objectives of the study. A two-variable regression model has been adopted to analyze and process the empirical data on deposits and loans of the study bank. The study reveals that there is a strong relationship between loans and deposits and the behavior of deposits affects lending a large extent. The value of the correlation coefficient indicates that the two variables, loans and deposits are highly positively correlated. The study shows that deposits are a major factor in bank fund management and it has a significant impact on loans and advances. Finally, RAKUB should cautiously maintain balance between loans and deposits for its survival in the competitive world of business.
Introduction
The deposit behavior, interest rates and loan recovery programs are critical in understanding the micro-economic functions of a country. The banks are showing different financial structures in deposit behavior according to their credit view. From a micro-economic perspective, banks have allocated incentives to change the prices of their loans and other advance distributions. Banks with large capital or large market share have taken initiatives to change high loan mark-ups and adjust the loan and interest rates in changing market conditions. Again, corporate loans are more competitive relative to consumer products in the bank assets. The interest rates of demand and savings deposits are very rigid in the case of bank liabilities. The financial structures and liabilities of banks' are influencing on interest rates and deposits. The deposit interest rates tend to be more rigid upwards when the adjustment for loans is occurring relatively symmetric (Ferre et al., 2007). Zarruk (1989) showed that increases in bank capital can increase the intermediation margin while deposit instability reduces the margin. Madura and...