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Bank & Finance - December 31, 2023

Banking sector facing confidence crisis

Mahfuja Mukul: Various incidents in the banking sector have repeatedly peeked through the year. One of them was the fluctuation of the customer’s trust in the bank. Many customers have withdrawn money from the bank. Bank counters are called to withdraw money. Bangladesh Bank increases cash in the market by printing money. Confidence comes back at some point. Bank deposits increase. But it was not sustainable. In such a situation, the customer is in a dilemma whether to keep the money in the bank or to withdraw it. Many customers are in doubt whether the bank money will be stolen or will be returned. The crisis of confidence arose again in December, centered on the central bank’s letter on the liquidity of the five Islamic-style banks, which has not yet resolved.
Most of the country’s banks have liquidity crunch. Among them, five Shariah-based banks and the National Bank are in dire straits. These banks are unable to protect CLR and SLR as security against customer deposits. For this, Bangladesh Bank has imposed a fine and is not in a position to pay it. In this situation, Bangladesh Bank threatened to stop transactions by restricting the payment of fines to 20 working days, which caused panic across the country. Many withdraw money from banks. However, Bangladesh Bank is monitoring the situation by providing adequate cash support to the banks. However, many customers are in the swing of a crisis of confidence.
Meanwhile, due to the dollar crisis in the commercial banks, the open market broke all past records and traded up to Tk 129 per dollar. Different banks manipulate dollars again. 10 banks were fined on this charge. Besides, amid criticism, Janata Bank’s special consideration loan of Tk 22,000 crore to Beximco came under renewed discussion.
On the other hand, on the advice of the International Monetary Fund, the loan interest ceiling was lifted and the interest rate was fixed on the basis of the six-month average of Treasury bills in the ‘smart’ method. It is a good idea not to have more than three bank directors from the same family as per the advice of the organization. Apart from this, IMF waived two installments of Tk 470 crore loan due to reduction of defaults and following BPM 6 manual in reserve calculation. This brought some relief to the reserves.
Sri Lanka, a country with a devastated economy, has returned Bangladesh’s $200 million loan with interest to prevent it from turning around. Although economists and analysts have predicted, the loan to Sri Lanka may not be repaid. Apart from this, the credit information Bureau (CIB) of the customer has been uploaded to the central bank server for a long time before the national elections, but it has recently been left in the hands of commercial banks. Now commercial banks can inspect and modify CIB information. It has been widely criticized.
According to the data of Bangladesh Bank, the record of defaulted loans was created in the country’s banking sector in the current year. At the end of the June quarter of this year, the total defaulted loans in the banking sector was Tk 1 lakh 56 thousand 39 crores, which is 10.11 percent of the total disbursed loans. Total disbursed loans in the banking sector till this time stood at Tk 15 lakh 42 thousand 655 crores. Apart from this, there has been a deficit in the financial accounting index in the current financial year. Never before in the country’s history has there been a fiscal deficit. Even Governor Abdur Rauf Talukder himself admitted in an event that in his 36 years of service, he had never seen this index negative.

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