Al Amin :
Banks are now facing liquidity crisis due to an escalation of import financing and a rising demand for loans from businesses as the economy returns to normalcy.
Both the letter of credits (LCs) financing, and the private sector credit growth rose vibrantly in the post Covid-19 period, which forced the banks to be watchful in disbursing loans, bankers said.
Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank, told The New Nation on Saturday, “The liquidity stress has become visible in banks due to the escalation of LC financing and the banks are more cautious in disbursing LC-related loans.”
“Uniform exchange rate is scheduled to be declared on Sunday, to reduce the stress,” he said.
The total liquid assets of scheduled banks stood lower at Tk 435,635 crore at the end of March 2022, compared with Tk 449,088 crore at the end of June 2021.
The minimum liquidity requirement of the scheduled banks was Tk 235,698 crore at the end of March 2022. The scheduled banks thus held an excess liquidity of Tk 199,937 crore as of end March 2022, according to Bangladesh Bank data.
But, the situation is completely different now owing mainly to the excessive growth of imports.
The total value of custom based import during July-March of FY22 remarkably increased by 43.85 per cent to $66.50 billion against $46.23 billion during July-March of FY21.
Besides, custom based import in March alone of FY22 increased by 25.39 per cent to $7.73 billion as compared to $6.16
billion of the same month of the previous fiscal year caused by higher purchase of fuel oils to meet a growing domestic demand amid expanding activity after the pandemic slowdown.
Imports are expected to rise further in the coming months and the pickup in imports has pushed the private sector credit growth.
Domestic credit grew by 14.01 per cent at the end of March 2022, while a lower rate of growth of 11.40 per cent was recorded during the corresponding period of the last year.
Against the backdrop, the interest rates on Treasury bills and T-bonds are on the rise. The yield on the 10-year Treasury bond stood at 6.80 per cent in October compared to 5.63 per cent in the same month a year ago.
Dr Ahsan H Mansur, Executive Director of Policy Research Institute (PRI), said, “Many banks are in a difficult situation to settle LCs, and so they have rushed to the central bank to purchase US dollars.”
“Lenders have to buy the greenback in exchange for the taka, which is playing a role in mopping up the local currency,” he said.
The injection of US dollars to fulfill the demand of businesses will exacerbate the liquidity stress, he added.
The Bangladesh Bank has injected nearly $6 billion into the market in this fiscal year.
