Banks should manage liquidity with caution

Senior bankers and experts suggest that banks in Bangladesh are cautious in liquidity management early in 2018 as the majority of them face a shortage of available cash at the end of the year. 39; year.

An increase in credit growth to the private sector, large import payments, and declining depositor confidence in the banking sector could erode the banks' liquidity base, they added.

The higher interest rate of government saving tools compared to that of bank credit products will further affect the management of bank liquidity next year.

Syed Mahbubur Rahman, chief executive officer of Dhaka Bank, said the banking sector could face a liquidity shortage in 2018 as loans disbursed by banks grew at a higher rate than bank deposits. outgoing year.

Banks may also face a shortage of currency funds due to the need to make a huge amount of import payments, he said.

The latest volatile situation in the banking sector could also have a negative impact on depositor confidence, which will add additional pressure on banks' efforts to raise funds from ordinary people, said Rahman, who is also president of the bank. the Association of Bankers. .

"The government will try to implement its megaprojects next year because 2018 is a pre-election year, which will fuel its borrowing from banks," he said.

According to data from the Bank of Bangladesh, excess liquidity in the banking sector declined to Crk 90,000 during the first week of November, to Lk 1.06 billion in the last week of June. He was Tk 1.23 lakh crore in December 2016.

Md Arfan Ali, Managing Director of Bank Asia, said that nonperforming loans have continued to maintain an upward trend in recent years, affecting banks' liquidity base.

A huge amount of funds was stuck in banks as they were forced to keep provisions against defaulted loans, he said.

"Banks should adopt a cautious policy towards the usual defaulters so that they are not allowed to obtain credit in the coming year." Banks should make efforts to recover Loans classified from the beginning of next year, "said Ali.

BB's data shows that the default loan amount has increased from Tk 6.159 crores to Tk 80.307 crores in September compared to that of a quarter ago.

AB Mirza Azizul Islam, a former financial advisor to a caretaker government, said that private sector credit growth continued to rise, but the question was where did the loans go?

Stronger credit growth in recent months could continue over the next year, which could lead to disappointment in the banking sector, he said.

Private sector credit growth in October was 18.63%, which is much higher than the target of 16.20% set for the first half of the year. fiscal year, shows the BB data.

The central bank should investigate and find where was the final destination of private credit to tackle classified loans, said Islam.

Mamun-Ur-Rashid, chief executive of Standard Bank, said banks should avoid aggressive lending to properly manage their cash base.

The central bank has recently taken administrative action against some banks in this regard, which will send a message to other banks, he said.

On December 17, the BB froze Tk 51 crore in the current account of ONE Bank with the banking regulator and Tk 25 crore in that of Premier Bank for aggressive lending practices that exceeded the limit allowed for the rate of early deposit.

The interest rate on deposit has risen sharply, indicating that banks are now facing a shortage of available funds, said Rashid.

"The higher interest rate on savings tools continues to encourage ordinary people to keep their money on instruments avoiding the bank." Such a phenomenon has emerged as a challenge for banks, "he said.

Businessmen may adopt a "slowdown" policy to expand their business next year, considering that it is the pre-election year that will affect banks' profitability, he added.

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