Dhaka, Bangladesh (BBN)- The overall excess liquidity with the country’s banks dropped by nearly 18 per cent in January mainly due to higher credit growth, particularly in the private sector.
The liquidity came down to BDT 712.36 billion in January 2018 from BDT 866.96 billion a month before, according to latest statistics of the central bank. It was BDT 921.64 billion in September 2017.
Selling of US dollar by the central bank has also contributed to help the commercial banks reduce their excess liquidity, according to officials.
They also said major portion of the excess liquidity has already been invested in the government-approved securities and Bangladesh Bank (BB) bills as a risk-free investment for the banks.
On the other hand, excess reserves, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, rose to around BDT 47 billion in January last from BDT 46 billion in December last year.
Talking to the BBN, a BB senior official said the excess liquidity may rise in the coming months as the central bank has already taken different measures, including revised advance-deposit ratio (ADR) limit.
The ADR of all banks is re-fixed at 83.50 per cent for conventional banks and at 89 per cent for shariah-based Islamic banks. The existing ratios are 85 and 90 respectively.
The banks have to make adjustment gradually by December 31 this calendar year.
However, the private sector credit growth increased further in January due to higher trade financing for settling the import payment obligations particularly for food grains, fuel oils and capital machinery, according to bankers.
The credit growth to the private sector rose to 18.36 per cent in January 2018 on a year-on-year basis from 18.10 per cent a month ago.
The total outstanding loans with the private sector rose to BDT 8,514.15 billion in January last from BDT 8,460.87 billion in December 2017. It was BDT 7,760.56 billion in January 2017.
Besides, around BDT 138 billion entered into the BB’s vault in exchange of US$1.68 billion sold by the central bank to the banks during a period from July 01 to March 20 this year, the BB data showed.
The central bank of Bangladesh has resumed giving the support in the recent months through selling the US currency to the banks directly to keep the foreign exchange market stable.
BBN/SSR/AD