Dhaka, Bangladesh (BBN) – The overall excess liquidity with the country’s commercial banks decreased slightly in January in view of political stability restored in the country after a prolonged turmoil.

The excess liquidity dropped by more than 6.0 percent to BDT 893.37 billion as on January 9 last from BDT 955.81 billion in December last. It was BDT 900.74 billion in November 2013.

Of the amount, a total of BDT 790.95 billion has been invested in the government securities, which was 88.5 percent of the total excess liquidity with the banks, according to the central bank statistics.

Besides, excess reserve, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank stood at BDT 51.51 billion, which was 5.8 percent of the total excess liquidity.

On the other hand, the balance of foreign currency clearing account with the Bangladesh Bank (BB) was at BDT 50.90 billion as on January 9 last.

“Both investments in the government securities and balance in the foreign currency clearing account bear interest. So, these two items are not idle money for the banks,” a BB senior official told BBN.

He also said balance of foreign currency clearing account is also used to meet obligation of foreign trade in a large amount.

The amount of excess reserve, which was only 0.85 percent of the total deposit of the country’s banking system, may be identified as idle money for 56 commercial banks in Bangladesh, the central banker added.

“We expect the declining trend of excess liquidity with the banks to continue in the coming months. Political stability has started coming back after holding of the parliamentary elections on January 5 last.”
Talking to BBN, another BB official said, the excess liquidity in the banking system created a new record in December last year as falling trend in credit flow to the private sector in the recent months because of the political turmoil.
The rate of private sector credit growth came down to 10.60 per cent in December last from that of 10.95 per cent in November 2013. The rate was 16.61 per cent in December 2012.
The excess liquidity of the state-owned banks stood at BDT 412.07 billion in December last, while that of the private commercial banks was at BDT 436.63. The excess liquidity of the foreign commercial banks and specialised banks were BDT 90.98 billion and BDT 16.12 billion respectively at the same time.
BBN/SSR/AD-18Feb14-9:43 am (BST)