Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has expressed worries over the rising trend of credit deposit ratio (CDR) of the commercial banks, particularly of private commercial banks (PCBs), that indicates a growing mismatch in their fund position.
At least 24 PCBs out of a total of 30 have their CDR ranging between 83 and 101 per cent, instead of the standard 81 per cent, officials said.
Bangladesh Bank (BB), the country’s central bank, has called an emergency meeting, scheduled to be held at its office in Dhaka on Sunday, to discuss the CDR issue with the chief executive officers of PCBs, the BB officials added.
Most PCBs have faced fund mismatch between their assets and liabilities lately due to a gradual hike in credit demand for import of essential commodities including food grains, petroleum products and power plant equipment at higher prices because of the overheated global market.
“The prices for food grains and petroleum products have increased substantially in the global market in recent months, putting extra-pressure on credit demand,” a senior official of a said, adding that the banks are now trying to discourage ‘unnecessary imports’ to ease credit demand that will also help to redress their fund mismatch.
The country’s imports grew by nearly 40 percent during the first half of the current fiscal over that of the corresponding period in the last fiscal.
Letters of credit (LCs) against imports worth $15.001 billion were settled during July-December period of fiscal 2010-11, compared to $10.717 billion in the corresponding period of fiscal 2009-10, according to the central bank statistics.
Meanwhile, the BB’s latest move for streamlining the CDR positions of banks, has come following a record surge of the inter-bank call money rate to 190 per cent on December 19 last, reflecting that some commercial banks were facing a big mismatch in their fund position.
“We’re now strictly monitoring CDR of the banks, particularly their credit flow to non-productive sectors, and implementation of credit risk grading manual (CRGM),” a BB senior official told BBN in Dhaka.
Under the CRGM, any loan will be divided into eight categories including superior, good, acceptable, marginal, specially mentioned, sub-standard, doubtful and bad and loss-making ones to help minimize credit risk in the banking sector.
The BB official also said the banks will have to minimize the mismatch between their assets and liabilities that will also help bring normalcy to the money market.
The recent volatility in the money market is not a good sign for the country’s financial sector, he added.
BBN/SSR/AD-18Feb11-1:16 pm (BST)
