This is the highest figure ever recorded and suggests savers are taking advantage of rate rises by providers.

Yet households also withdrew £4.8bn from banks and building societies in the same month, the largest amount since 1997 when the Bank of England (BoE) first began recording these figures.

They also withdrew £7.7bn from instant-access accounts, but £7bn was reinvested in fixed-term and notice savings accounts.

Following successive rate rises by the BoE, providers have reacted by upping the rates they pay to savers.

This week rates hit 5% on one-year fixed-rate bonds, for example, the first time this has happened since 2009, following the launch of a suite of new accounts from Isbank, via Raisin.

‘A bumper season for Cash ISAs’

Cash ISAs have been overshadowed since the introduction of the personal savings allowance, which allows most savers to earn up to £1,000 in interest before they pay any tax.

But this year’s results show a rise in demand for cash ISAs, following rate rises by providers.

Laith Khalaf, head of investment analysis at AJ Bell, said: “It looks like ISA season was an absolute cash cow for banks as consumers looked to protect their savings from the rising tax tide.

“These figures point to a bumper season for Cash ISAs, which is no surprise given that tax bands are frozen or reduced and higher cash rates now mean that even more modest savers are at risk of paying tax on their interest.”

NS&I sees bumper deposits

There was also £3.5bn deposited into National Savings and Investment (NS&I) accounts, the highest amount since September 2020. This follows an increase on the rate paid by the NS&I Direct Saver account and a boost to Premium Bonds.

Khalaf said: “NS&I is a major culprit in blowing a hole in consumer demand for bank and building society accounts.

“There may be safety worries as well as a return-seeking motive amongst consumers here.

“NS&I deposits are 100% backed by the Treasury and are consequently more secure than high street bank accounts. Savers may also have been attracted to the tax-free nature of Premium Bonds, which fulfil a similar function to Cash ISAs, albeit with a more random interest payment.”

Borrowing on credit also rose, up £1.6bn in March, a rise from £1.5bn in February.

‘Pandemic savings are now running on empty’

The amount of money being taken out of banks was the highest monthly figure since 1997. Khalaf said “you have to go back to the financial crisis, when people were queuing outside Northern Rock bank branches to get their hands on cash, to see a similar figure”.

He added: “The poor banking figures for March also suggest pandemic savings are now running on empty after a gruelling year of inflationary pressures, and some consumers are using cash built up in the bank to pay for day to day spending.

“With record levels of food inflation, high energy prices and winter only just receding, it’s easy to see why people might be turning to their savings to fund expenditure, which clearly negatively impacts their financial resilience to further shocks. Inflation is expected to fall back significantly as we move through the year, and we all better have our fingers crossed that it does.”