The advance-deposit ratio in banks decreased further in May as the credit demand in the private sector continued to drop due to an unfriendly situation for
business amid political unrest, said officials of the Bangladesh Bank.
According to the latest BB data, the overall ADR in the banking sector declined to 74.90 per cent as of May 2, 2013 from 76.59 per cent as of December 31, 2012. The ADR was 80.33 per cent as of June 7, 2012.
As per BB rules, the conventional commercial banks are not allowed to invest more than 85 per cent of their deposits while Islamic banks and Islamic wings of the conventional commercial banks can invest up to 90 per cent of their deposits.
A number of banks earlier crossed the ADR limit but now the scenario has changed as the credit demand from the private sector decreased continuously due to the ongoing political unrest, shortage of gas and electricity and high rate of interest on banks’ lending, a BB official told New Age on Wednesday.
He said that the banks had also taken a cautious policy to sanction fresh loan as the banking industry recently saw a number of loan scams.
The ADR in the banking sector will decline further in the coming days if the ongoing political instability persists, he said.
The BB data showed that the ADR in 33 banks had went down significantly between December 31, 2012 and May 2, 2013.
The 33 bank whose ADR ratio declined in May are Janata Bank, Agrani Bank, Pubali Bank, Uttara Bank, National Bank, IFIC Bank, UCBL, ICB Islamic Bank, NCC Bank, Prime Bank, Southeast Bank, Dhaka Bank, Al-Arafah Islami Bank, Social Islami Bank, Mercantile Bank, Bangladesh Commerce Bank, Mutual Trust Bank, First Security Islami Bank, Premier Bank, Trust Bank, Shahjalal Islami Bank, BRAC Bank, Standard Chartered Bank, State Bank of India, Commercial Bank of Ceylon, National Bank of Pakistan, Citibank NA, Woori Bank, HSBC, Bank Al Falah, Bangladesh Krishi Bank, BASIC Bank and Bangladesh Development Bank.
The businesspeople took a ‘wait and see’ approach in the last few months due to the ongoing political unrest in the country, another BB official said.
For this reason, the credit growth in the private sector dropped to 12.68 per cent in February year-on-year, the lowest since the FY 2009-10, he said.
A commercial bank official said that the credit flow to the market decreased in the last few months as businessmen were unwilling to expand their investment now.
Due to the lower loan disbursement, the commercial banks fear that their profitability may be hit in future as loan distribution is one of the pivotal businesses for them, he said.
Under the circumstances, some banks have gone for investing in the government securities like treasury bills and treasury bonds for using their idle fund, he said.
Moreover, the banks are also investing their fund in Bangladesh Bank bill and reverse repo, he said.
The ADR ratio in the state-owned commercial banks dropped to 67.40 per cent as of May 2, 2013 from 68.95 per cent as of December 31, 2012 and that of the local private commercial banks to 78.37 per cent from 79.65 per cent.
The ADR ratio in the foreign commercial banks decreased to 67.32 per cent from 72.15 per cent, and that of the Islamic banks to 85.55 per cent from 86.89 per cent, showed the BB data.
-With New Age input
