Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has warned eight private commercial banks (PCBs) that it would curb their business expansion if they fail to minimize fund mismatch within the next two weeks.
“We’ll take actions against the private commercial banks if they fail to minimize the mismatch between their assets and liabilities in 14 days,” a senior official of the Bangladesh Bank (BB) said on Thursday.
The warning comes after the inter-bank call money rate shot up a record 190 per cent earlier this week, indicating that some commercial banks were facing a big mismatch in their fund position, the BB officials said.
The central bank will impose restrictions on some major expansionary activities including issuance of license for authorized dealer (AD) branch, generally known as foreign exchange branch, and approval for opening of new branches.
The indirect interventions may take place after the deadlines, the central bank official confirmed.
The warnings were issued to the banks in batches: two on Wednesday and six on Thursday. Three more banks are expected to get the directives next week.
The inter-bank call money rate – the interest rate at which banks lend to each other — eased further Thursday after the central bank’s intervention and tough words, officials said.
The call rate ranged between 15 per cent and 25 per cent on the last day of the week against 9-30 per cent on Wednesday. However, most of the deals were settled at rates ranging from 18 per cent to 20 per cent, treasury officials said.
The central bank intervened in the market since Monday that continued until Thursday to bring back stability in the inter-bank call money rate, the BB officials added.
On Thursday four PCBs were also directed to take measures to reduce their credit growth by the next 14 days so that they can minimize risk, BB officials said.
The instruction was given at a meeting with the chief executive officers of the PCBs held in the central bank Thursday with Senior Deputy Governor of the BB Nazrul Huda in the chair.
The BB has asked the PCBs for taking initiatives to minimize their credit deposit ratio (CDR) at a rational level, the central bank official said, adding that banks have CDR ranging between 84 per cent and 93 per cent instead of 81 per cent, a standard ratio.
The central bank is now strictly monitoring CDR of the banks, their credit flow particularly in non-productive sectors and implementation of credit risk grading manual (CRGM), he added.
Under the CRGM, any loan will be divided into eight categories including superior, good, acceptable, marginal, special mention, sub-standard, doubtful and bad and loss to minimize credit risk in the banking sector.
BBN/SSR/AD-24Dec10-8:56 am (BST)
