Dull Business Amid Political Unrest
Surplus bank fund soars to Tk 90,073cr
Surplus liquidity in the banking sector increased to Tk 90,073.73 crore as of November 28 from Tk 79,663.77 crore as of October 17 this year due to low investment by and credit demand from the businesspeople amid political unrest, said Bangladesh Bank officials.
They said that surplus liquidity in the banking sector increased rapidly in the last few months as the businesses were now unwilling to make fresh investment in their enterprises by taking credit from banks amid the political turbulence ahead of the upcoming general elections.
According to the BB data, surplus liquidity in the scheduled banks stood at Tk 62,121.61 crore as of March 7 and at Tk 83,898.90 crore as of September 26, 2013.
A BB official told New Age on Sunday that the central bank calculated the surplus money in the scheduled banks by deducting required statuary reserve ratio and cash reserve ratio from the banks’ total deposit figure.
The BB data showed that the required SLR and CRR of all banks was Tk 1,01,557.80 crore as of November 28 while their total liquidity figure stood at Tk 1,91,727.70 crore. So, the surplus liquidity in the banking sector stood at Tk 90,073.73 crore in the period.
Banks, however, invested a significant amount of the surplus liquidity in the treasury bills and T-bonds with an interest rate lower than the rate set for banks in the last few months, the BB official said.
He said that the mounting surplus liquidity was an ominous sign for banks as it would decline their profitability.
Loan disbursement by banks in the private sector declined massively in the recent period which ultimately pushed up their surplus liquidity, the central bank’s official said.
He said due to a decreased credit demand from the private sector, the majority of the banks had already cut their lending rates to attract borrowers and the rate would go down further in the coming months.
The banks’ attempt, however, failed to boost their loan disbursement as the businesspeople is now thinking that the existing political unrest is not suitable for their business, he said.
Another BB official said a downward trend in the credit- or advance-deposit ratio in the banking sector in the last few months virtually pushed up the surplus liquidity.
The ADR in the banking sector dropped to 71.28 per cent as of November 28, 2013 from 76.59 per cent as of December 31, 2012.
The ADR was 80.33 per cent as of June 7, 2012, the BB data showed.
As per the 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 had crossed the ADR limit in 2011 and 2012, violating the BB rules but now the situation has changed totally as the credit demand from the private sector continues to decrease due to the ongoing political unrest, the BB official said.
He said the ADR in the banking sector along with its credit growth would decline further in the coming months if the ongoing political instability persists.
The private sector credit growth declined to 11.04 per cent in October 2013 compared with that of 20.60 per cent rise in the corresponding month of last fiscal year.
-With New Age input
