Dhaka, Bangladesh (BBN)– The overall excess liquidity with the country’s scheduled banks decreased substantially in November this year mainly due to higher credit growth, particularly in the private sector.
The central bank also sold significant amount of US dollar in the recent months, contributing to help the commercial banks reduce their excess liquidity, according to officials.
The excess liquidity came down to BDT 900 billion in the first week of November from BDT 1.06 trillion in the last week of June, according to latest statistics of Bangladesh Bank (BB). It was BDT 1.23 trillion in the last week of December, 2016.
On the other hand, excess reserve, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, rose to BDT 55 billion during the period under review from BDT 42 billion in June 2017.
Talking to the BBN, a BB senior official said a significant amount of local currency has already gone to out of circulation as the central bank sold the US currency to the banks.
An amount of BDT 79.29 billion entered into the BB’s vault in exchange of US$ 972 million sold by the central bank to the banks during a period from July 01 to December 21 this year, the BB data showed.
The central banker expected that the falling trend of excess liquidity might continue in the coming months if the existing private sector credit demand persists.
Echoing with the BB official, Syed Mahbubur Rahman, newly elected chairman of the Association of Bankers, Bangladesh (ABB), said the existing falling trend of excess liquidity might continue in the coming months if the ongoing higher private sector credit growth persists.
Mr. Mr. Rahman, also managing director and chief executive officer of Dhaka Bank Ltd, said it would be prudent on our part to focus more on mobilizing deposits so as to avoid any crunch situation that may occur in future.