BB charging huge fine
Staff Correspondent: The central bank has set a limit to reduce risk to depositors and stop banks from aggressive-lending. 11 commercial banks have given aggressive loans in violation of loan limit capacity. These banks are now paying fine everyday to central bank.
This information has been revealed in the June update of the loan-deposit ratio limit (ADR) of Bangladesh Bank.
According to the latest Central Bank guidelines, a bank can lend or invest Tk 87 against a deposit of Tk 100. The limit of Islamic Sharia based banks in this case is up to Tk 92. Many banks violated this limit and gave more than 100 percent loans. That is, they gave a loan of Tk 100 or more against Tk 100 deposit.
According to the data of the Central Bank, Bangladesh Commerce Bank has given maximum 124.38 percent of loans. Besides, AB Bank gave 92.35 percent, IFIC Bank 90.29 percent, National Bank 99.12 percent and Padma Bank 88.2 percent.
Besides, among the Islamic Sharia-based banks, private First Security Islami Bank has 108.53 percent, Global Islami Bank 99.53 percent, Standard Bank 93.21 percent, Union Bank 101.87 percent, AB Bank (Islami Banking) 107.41 percent and Shariah branches of Premier Bank and Pubali Bank have invested 122.82 percent and 95.89 percent respectively.
Action to be taken against violators
Finance advisor and economist of the former caretaker government about the fixed debt limit AB Mirza Azizul Islam told Daily Industry that the central banks of all countries in the world determine the limit of loan-deposit ratio (ADR). Commercial banks are obliged to accept it. If any bank violates this limit, then action should be taken against them. Also, ADR adjustment should be done quickly by lowering the lending limit for banks that have transgressed.
Lending beyond the limit means that depositors are at risk, he said, because banks have given more loans, but they do not have deposits – they will not have to repay the liabilities on time. When the liabilities fail, people will lose confidence in the banking sector. This will reduce people depositing money in the bank. Which is by no means desirable.
BB monitoring strongly
When asked about this, the executive director and spokesperson of the central bank said Majbaul Haque told Daily Industry that the increase in ADR does not mean that everyone has given more loans. Many times, the loan ratio increases when the deposit increases. Again, banks have capital, keep extra provisions, use them. So, nothing can be said directly without analyzing it.
He also said that the central bank has set a limit for the credit-deposit discipline, so that banks stay within it. Those who lend more than the limit will face a liquidity crisis. Now some banks are outside this limit. Some of those banks are already troubled. Many have reduced their deposits. Banks which are in this problem are kept under close monitoring. Among them, coordinators are placed in many banks including Padma, National, First Security. Wherever there is a problem, coordinators and observers are being appointed in that bank by the central bank. They identify problems and work on solutions.
According to the Central Bank report, the total amount of deposits in the country’s banks till June 30 of this year is Tk 17 lakh 49 thousand 428 crore 15 lakh. Out of this, Tk 14 lakh 70 thousand 525 crores of loans have been disbursed. Which is 78.51 percent of the total deposits.
According to the report, the ADR ratio of most of the banks is within the prescribed limits. Among those who have borrowed or invested outside the legal limits, private AB Bank deposits are Tk 31,589 crores and loans are Tk 30,645 crores. Besides, the bank has deposits of Tk 1,297 crore in various banks and financial institutions. Apart from this, they have given a loan of Tk 273 crore from the Export Development Fund (EDF).
Bangladesh Commerce Bank deposits Tk 162.97 crore. They have deposits of Tk 30.33 crore in various institutions. Against this, the bank has given a loan of Tk 240.43 crores. ADR of the bank is 124.38 percent.
National Bank’s ADR ratio was supposed to be 87 percent as per norms. But the bank’s ADR stands at 99.12 percent. The bank has given loans of Tk 42,352 crore against deposits of Tk 41,088 crore. Their debt to EDF is Tk 797 crore.
IFIC Bank’s deposits are Tk 41,335 crores. Against this, they gave a loan of Tk 38,299 crores. Their debt to EDF is Tk 958 crore. ADR of the bank is 90.29 percent.
ADR ratio of Padma Bank stands at 88.2 percent. The fourth-generation bank has customer deposits of Tk 5,737 crore and their deposits in various institutions are Tk 822 crore. On the contrary, they gave a loan of Tk 5,786 crores.
Islamic Sharia-based banks have the opportunity to invest a maximum of Tk 92 against Tk 100, but four banks have violated this limit.
Among them, private Fast Security Islami Bank’s deposits are Tk 45,091 crores. They have deposits of Tk 3,112 crores in various banks and financial institutions. And invested Tk 53,647 crore. Of this, EDF has financed Tk 1,319 crore. ADR of the bank stands at 108.53 percent.
ADR of Global Islami Bank is 99.53 percent. Their deposits are Tk 11,774 crores. Investment Tk 12,084 crore.
Union Bank deposits Tk 18,616 crores. Tk 4,288 crores deposited in various banks and financial institutions. Their investment is Tk 23.43 crore. Out of this they have financed Tk 142 crore from EDF. The bank’s ADR stands at 101.67 percent.
Standard Bank’s ADR is 93.21 percent. Their deposits are Tk 17,443 crores. They have deposits of Tk 570 crore in various institutions. The investment of the bank is Tk 17,483 crores. Out of this they have financed Tk 692 crore from EDF.
Deposits in Shariah branch of Pubali Bank are Tk 1,340 crore. Their own deposits are Tk 195 crores. Against this, it has invested Tk 1473 crores. They invested 95.89 percent.
Premier Bank’s Shariah branch invested 122.82 percent in violation of limits. The deposit of the bank is Tk 1,509 crores. Their own deposits are Tk 200 crores. Against this they have invested Tk 2,026 crore.
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