Bangladesh Bank on Wednesday said it would redefine the credit-deposit ratio of commercial banks to tackle the liquidity crisis in the banking sector and that the new initiative would increase the banks' investment capacity by Tk 5,000 crore.
The central bank at a news briefing presided over by deputy governor Murshid Kuli Khan denied the existence of any liquidity crisis and claimed the main problem was the banks' inefficient asset management.
Musrhid Kuli Khan explained the liquidity situation of the banks and the central bank's strategy to tackle the crisis.
He said, 'The BB provided Tk 9,303 crore to different banks as liquidity support.'
'The CDR does not get highlighted due to weak fund management system of the banks,' he claimed.
He said the central bank would issue a circular in a day or two stating the new guidelines
that would show the liquidity in the banking system was much more than what was being reported but the real amount was not calculated due to the banks' inefficiency.
'The banks will be more relaxed and it
will not increase the inflation rate in any way,' he added.
According to the new move, the BB will allow the banks to include the amount of their capital, other provisions, inter-bank deposits, and the excess money kept to meet the cash reserve requirement, except the borrowings from call money market, in the amount that can be invested.
BB executive director Shitangshu Kumar Sur Chowdhury said, 'The BB estimates the new clarification of liquidity will add around Tk 5,000 crore to the amount which can be used by the banks for investment.'
He said, 'According to the new calculation, the existing assets of the banks will be added to their deposits, whereby the banks will get more money to hand out loans.'
He explained that there was a CDR shortfall not liquidity crisis and said the government borrowing from the banking system and the BB would not affect the money market in any way.
'The banks in line with the BB directive reduced the CDR to 81.54 per cent by May from 85.64 per cent in February,' he mentioned.
Earlier in February, the BB directed the commercial banks to reduce the CDR to 85 per cent and the Islamic banks to 90 per cent.
The banks, financial institutions, and business leaders have recently been reporting that they were facing a liquidity crisis but the central bank has been claiming that there was an excess liquidity of Tk 28,000 crore in the banking system.
The Bangladesh Association of Banks on Monday urged the Bangladesh Bank to increase the ceiling of CDR of commercial banks from 85 per cent to 90 per cent and of Islamic banks from 90 per cent to 95 per cent.
BB executive director Jahangir Alam also spoke at the briefing.
Source : New Age
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