Dhaka, Bangladesh (BBN) - Bangladesh’s private commercial banks (PCBs) are likely to eligible for receiving more government fund as deposit to meet their growing demand for liquidity.
The government functionaries are now securitizing the possibility of relaxation of the policy allowing the state-owned enterprises (SoEs) to deposit more funds with the PCBs to help mitigate the ongoing liquidity crunch.
Under the proposed relaxation, the SoEs may be allowed to deposit 60 per cent of their funds with the public banks and rest 40 per cent with the PCBs.
Currently, the state agencies are allowed to deposit 75 per cent of their funds with the public banks and rest 25 per cent with the PCBs.
Talking to the BBN, a senior policy marker of the government, familiar with the move, said an official order is expected to issue shortly in this connection.
On the other hand, the private bankers are set to seek 50 per cent deposit of the government funds to meet the growing demand for the liquidity in the banking sector.
They may also urge the regulators to slash the cash reserve requirement (CRR) by 100 basis points to 5.50 per cent for the commercial banks from the existing 6.50 per cent on the same ground, according to banking sector insiders.
The appeals will be made at a meeting of the Bangladesh Association of Banks (BAB) scheduled to be held at BAB office in the capital on Friday evening in the presence of Finance Minister AMA Muhith.
The BAB has arranged the meeting to discuss the ongoing core problems in the banking sector and possible remedy, they added.
The chairman and managing director of the BAB member banks have already been requested to attend the meeting.
The government’s latest moves came against the backdrop of rising trend of the overall deposit rates since the beginning of this calendar year, primarily due to withdrawal of funds from the PCBs by a section of depositors, including public sector agencies.
The withdrawal, according to the sector insiders, has resulted in a notable shortage of liquidity in the sector recently.
The problems centering the Farmers Bank Ltd (FBL) and some other scams have created a sort of crisis of confidence in the banking industry.
Most SoEs are now reluctant to keep their funds with the PCBs that are suspected to be fundamentally weak.
Some SoEs particularly oil and gas distribution companies have already withdrawn a part of their special notice deposits from PCBs, they added.
The PCBs are now forced to offer higher rates to comply with the funded commitments to their clients as per respective schedules, they explained.
The situation emerged after the Farmers Bank failed to pay a fixed deposit worth over Tk 5.08 billion due to liquidity shortage.
The money belongs to the Climate Change Trust Fund (CCTF).
After the incident, the government fund managers particularly of power, energy and gas sectors are exercising caution while depositing funds with different PCBs.
Earlier on February 17 last, BB Governor Fazle Kabir at a function sought the finance minister’s intervention to stave off withdrawal pressure coming from the state entities.
BBN/SSR/AD