Dhaka, Bangladesh (BBN)- Bangladesh’s commercial banks have started investing their excess funds in the government securities following lower demand for fresh credit especially from private sector, bankers said.
The banks’ investment in the treasury bonds and treasury bills rose to BDT 929.09 billion, which was 94.34 percent of the total excess liquidity, as of February 20 last from BDT 790.09 billion on January 9 this year, according to the central bank statistics.
“We’ve no alternative right now to investment in the government securities for minimising our cost of funds,” a senior treasury official of a leading private commercial told BBN in Dhaka.
He also said a lower-than-expected level of credit demand from the private sector has necessitated most banks to put their excess liquidity in government securities.
The overall excess liquidity with the commercial banks stood at BDT 984.78 billion as of February 20 last. It was BDT 893.37 billion as of January 9, the Bangladesh Bank (BB) data showed.
“The banks always prefer to invest their funds in the short-term securities instead of long-term ones for avoiding mismatch of their overall fund management in future,” the private banker observed.
Currently, three T-bills are being transacted through auctions to adjust the government's borrowing from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
On the other hand, five government bonds with duration of two, five, ten, fifteen and twenty years respectively – are being traded in the market.
All banks’ credit growth came down to 7.44 percent as of February 20 last from 7.99 percent on January 30 this calendar year while deposit growth rose to 16.48 percent from 16.14 percent, according to the central bank officials.
“Core banking business has faced a stagnant situation for more than a year due mainly to poor demand for fresh credit caused by the political uncertainty, inadequate infrastructure facilities and availability of low cost foreign currency loan for the private sector,” the private banker noted.
He also said the credit-deposit ratio (CDR), an important indicator of the banking business, remains almost static at around 71 percent, which is lower than safe limit, set by the BB.
The central bank earlier set CDR at 85 percent for the conventional banks, while it remains at 90 percent for the Sharia-based Islamic banks.
BBN/SSR/AD-17Apr14-11:14 am (BST)
