Dhaka, Bangladesh (BBN) – Excess liquidity in the country’s banking sector fell nearly by 10 per cent in August this year as investment demand in different sectors including capital market has been increased, officials said.

The overall excess liquidity with the commercial banks came down to BDT 299.00 billion in August from BDT 331.27 billion in July last, according to the central bank statistics.

“The excess liquidity started to show a declining trend in July which continued in the month of August,” a senior official of the Bangladesh Bank (BB) said, adding that higher implementation of Annual Development Program (ADP) has also contributed to the fall of the excess liquidity in the banking sector.

ADP spending grew by 76 per cent to BDT 23.76 billion during July-August period of the fiscal 2010-11 (FY11) compared to BDT 13.47 billion in the corresponding period a year ago.

The excess liquidity of the state-owned banks stood at BDT 128.25 billion as on August 31 this year while that of the private commercial banks was at BDT 137.08 billion. The excess liquidity of the foreign banks was BDT 33.67 billion at the same period.

Total liquid assets of commercial banks stood at BDT 848.32 billion in August last against BDT 871.96 billion in June, 2010.

Excess liquidity of the scheduled banks also dropped at BDT 299.00 billion in August, 2010, against BDT 344.98 billion recorded in June this year, the BB’s data showed.

“Scheduled banks holding of liquid assets as of June, 2010 in the form of cash and balances with Sonali bank, balances with Bangladesh Bank and unencumbered approved securities are 5.72 percent, 31.22 percent and 63.06 percent respectively of total liquid assets,” the central bank said in a report on liquidity position.

The central bank officials said most of the banks have invested their excess liquidity in different government treasury bills and bonds to minimize the cost of funds.

BBN/SSR/AD-11Oct10-12:45 am (BST)