Staff Correspondent: The balance order of deposits and loans, which should be there, has broken down in 17 banks. Aggressive loans have been given by these conventional and Shariah-based banks. It has violated the limits set by Bangladesh Bank. Because of this, the concerned banks are in extreme liquidity crisis. This information has come up in the latest report of Bangladesh Bank.
Experts fear that the existing situation has created additional risks for depositors. According to them, irregularities, corruption and unnamed loans are behind the collapse of the bank’s credit system. In the banking sector, there have been allegations of giving large amounts of benami loans in recent times. If this continues, the sector will be at risk.
According to the rules of Bangladesh Bank, conventional bank can give loan Tk 87 out of Tk 100 and Islamic bank can give Tk 92.
This is called Advance Deposit Ratio (ADR) or loan-deposit ratio limit in banking terms.
According to the Central Bank’s report, the ADR of the National Bank of the conventional style stood at 98.23 percent on January 1. ADR in both streams of another bank stands at 96.64 and 103.45 percent, state-owned Basic Bank 91.17, One Bank 89 and foreign National Bank of Pakistan ADR 87.52 percent.
Widespread irregularities and corruption have taken place in these banks. Apart from this, Community Bank’s ADR is 88.28 percent, another bank’s ADR is 88.05 percent and IFIC Bank’s ADR is 87.48 percent.
Apart from this, Exim Bank’s 100.28%, Standard Bank’s 96.28%, Premier Bank’s Islamic Window 155.09% and Bangladesh Commerce Bank’s Islamic Window’s ADR are 103.45%. Apart from this, the ADR of five other Shariah-based banks stood at 104.54, 102.27, 100.41, 96.81 and 93.01 percent respectively.
When asked about this, the former caretaker government’s finance advisor. AB Mirza Azizul Islam told, “Lending beyond the limit against deposits disrupts the credit system.” Besides, the debt collection picture of the banks is not very satisfactory now. In such a situation, if the non-performing loans increase further with additional loans, then there is a danger that the bank as well as the depositors will suffer. Therefore, the intervention of the central bank in this matter is necessary.
Bangladesh Bank executive director and spokesperson said. Mejbaul Haque told, “There is a limit on how much money can be given against deposits. However, this ratio of banks fluctuates from time to time. Because, if a bank receives a large deposit, then the lending capacity of that bank increases. Similarly, if a customer suddenly withdraws the deposit, then the lending capacity decreases. Then the bank goes beyond its ADR limit. Besides, this can happen even if special concessions are given for debt recovery.
Matter is temporary and relative. However, if a bank is outside the ADR limit for a long time, that bank must be warned by letter. If something unusual happens, action will be taken as per law.
A managing director (MD) of a private bank told that the lending limit set by Bangladesh Bank has undoubtedly done a lot of calculations and is of a global standard. It is not right to cross that limit. It will create risk in the banking sector. Depositors in particular will be at greater risk. He said that already some banks and non-bank financial institutions are not able to return money to depositors.
Officials related to the bank said that Bangladesh Bank has extended the period of ADR adjustment five times in a row to ensure loans or investments to the banks as prescribed by the law. However, many banks could not coordinate this. In such a situation, Bangladesh Bank increased ADR by 2 percent to improve the overall liquidity situation of the banking sector to bring dynamics in the flow of credit to the private sector. However, some banks have breached the limits, creating risks for depositors.
Staff Correspondent: The International Farakka Committee (IFC) is deeply saddened by the s…