The advance-deposit ratio in 22 banks, out of the total 47, decreased further in April as demand for credit in the private sector dropped due to an unfriendly business
situation amid political unrest, said officials of the Bangladesh Bank.
According to the latest BB data, the overall ADR in the banking sector, however, declined to 75.29 per cent as of April 25, 2013 from 76.59 per cent as of December 31, 2013.
The ADR was 80.33 per cent as of June 7, 2012.
The ADR, however, increased slightly on April 25 from 75.28 per cent as of March 14 of this year.
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 BB official told New Age on Wednesday that the increasing trend in ADR in April was a temporary phenomenon as the credit disbursement by the scheduled banks had recently decreased significantly.
‘In this situation, majority of the banks has recently been compelled to decrease their rate of
interest on deposits,’ he said.
The BB data showed that the ADR in 22 banks went down significantly between April 25 and March 14 of this year.
The 22 bank whose ADR ratio declined in April are Janata Bank, Pubali Bank, Uttara Bank, Islami Bank, IFIC Bank, ICB Islamic Bank, NCC Bank, Prime Bank, Al-Arafah Islami 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, BASIC Bank and Bangladesh Development Bank.
The BB data showed that the deposit growth in the banking sector increased to 2.66 per cent as of 25 April, 2013 from December 31, 2012 while the credit growth increased only 0.49 per cent in the period.
A number of banks earlier crossed the ADR limit but now the scenario has changed as the credit demand from the private sector is falling continuously due to the ongoing political violence, shortage of gas and electricity and high rate of interest on banks’ lending, another BB official said.
‘So, banks are increasing their investment in the government securities like treasury bills and treasury bonds with lower rate of interest,’ he said.
The ADR in the banking sector will decline further in the coming days if the ongoing political instability persists, he said.
The businesspeople took a ‘wait and see’ approach in the last few months due to the ongoing political unrest in the country, he said.
‘For this reason, the credit growth in the private sector dropped to 12.74 per cent in April year-on-year, lowest since the FY 2009-10,’ he said.
Due to the lower loan disbursement, commercial banks fear that their profitability may be hit in future as loan distribution is one of the pivotal businesses for them, he said.
-With New Age input