Mess in financial institutions; Banks facing intensified liquidity crisis
Islami Bank Bangladesh Limited has recently curtailed the authority of its branch managhers, making it mandatory to take permission of the head office for distributing loan amounting to Tk 500,000 and above.
Any of the 332 branches of the country's largest private commercial bank earlier could disburse any amount of approved loan.
The IBBL has taken the step, as do other banks, in the wake of intensified liquidity crisis of banks in recent times, according to bankers and businessmen.
Mainly the private banks have been plagued by the liquidity crisis, months before general elections, despite reluctance of many entrepreneurs in making investment decision in a potentially turbulent year.
The private banks have slowed down the process of loan disbursement, and raised interest rate up to 13 per cent in their desperate bid to collect deposits.
At least 20 private banks are currently facing liquidity crisis, according to the Bangladesh Bank officials.
The banks are now trying to realise loan money, instead of distributing fresh ones, some bankers told the media.
Mid-level bank officials said there is a pressure from the authorities to collect more deposits from the people.
The crisis heightens as the government organisations attempted to take back money deposited with some private banks. However, the government banks, which are sometimes given capital from taxpayers' money, are exceptions.
“The state-owned banks have enough money while private banks are facing liquidity crisis,” Association of Bankers’ Bangladesh (ABB) president Syed Mahbubur Rahman said.
He also pointed out that many customers do not want to take loans as the election is nearing. “It’s a common phenomenon in an election year as is ahead of the budget.”
Hossain Khaled, a director of the country's one of oldest business enterprises Anwar Group, said, “The effects of elections generally are felt at the end of the election year, but this time around, the liquidity crisis has surfaced at the beginning of the year.”
He acknowledged that businessmen remain cautioius while spending money in the election year. State-owned Sonali Bank, the largest one, is now lending money to most of the private banks.
“All private banks are borrowing money from us. We're are giving them money as much as we can, complying with rules,” said managing director of Sonali Bank Obayed Ullah Al Masud.
He added that the Sonali Bank is now receiving more loan applications from those who were earlier refused by the private banks. Managing directors of three other state-owned banks -- Agrani Bank, Rupali Bank and Janata Bank -- said they, too, have a good amount of money to lend for investment.
Customers not getting loans The central bank officials said the lending rate was of single-digit a few months ago, but it has now touched even 15 per cent. The rate of the call money is on the rise, as well, according to bankers.
Pubali Bank managing director A Halim Chowdhury said top business groups are also not getting loans easily. “The banks are thinking twice before approving any loan proposal,” he added.
‘Crazy’ for money The banks have raised interest rate thrice to 9-13 per cent on deposits -- a rate which was just 5.22 per cent in 2016. Rupali Bank and Agrani Bank have also increased their interest rate.
Bank officials said the depositors are running from one bank to another for getting better rates. The picture was opposite last year when some of the banks discouraged customers to deposit money.
Forex reserve shrinking Amid the rising price of US dollars, private bank officials forecast the crisis of dollars would further intensify in the coming days and as a result, the entire economy may suffer.
Bangladesh Bank records say it has already sold $12 billion dollars in the current fiscal year. The rate of a dollar against a taka rises up to Tk 83 from Tk 78 within a year.
The central bank had to pay Asian Clearing Union (AKU) more than $1.56 billion in January and February, compared to $1.155 billion in November-December.
The latest foreign exchange reserve has decreased to $32 billion from $33.36 billion only recently.