Economy Desk: High inflation and the economic crisis in the country have reduced excess liquidity in the banking sector. Industry stakeholders say that the cost of living has increased due to high inflation. For this reason, many people are withdrawing the saved money and meeting the expenses. Again, due to low interest on deposits, people are withdrawing money from banks and investing in other sectors. According to the statistics of Bangladesh Bank, the excess liquidity in the banking sector has decreased by 8 thousand 128 crores in the month of January. At present, some banks are in a liquidity crisis, but several banks have excess liquidity.
Bankers say the central bank’s massive dollar sales, low deposit interest rates, dollar appreciation, and customer cash withdrawals are reducing the banks’ excess liquidity. Excess liquidity in banks was Tk 2 lakh, Tk 3 thousand, and Tk 435 crore in June, according to Bangladesh Bank data. Then it gradually rose to 1 lakh, 37 thousand, and 600 crores in January.
The officials of the Treasury departments of several banks say that the banks will be in a dollar crisis throughout 2022. At this time, the banks’ liquidity crisis occurred due to massive dollar purchases from the central bank.
They also stated that when the interest rate on government bills and bonds is high, banks typically invest with excess liquidity. Again, if the rate of bills and bonds decreases, the amount of investment also decreases. On January 15, the central bank’s new monetary policy increased consumer loan interest rates from 9 percent to 12 percent. As a result, many people did not reinvest after their bond investments matured. Due to this, excess liquidity has decreased. Excess liquidity is determined after maintaining the statutory liquidity ratio (SLR) and cash reserve ratio (CRR).
It is mandatory for banks to maintain a 4 percent CRR in cash form and a 13 percent SLR in non-cash form with Bangladesh Bank. On February 19, the central bank called an auction for 91-day Treasury bills, where the yield rate was 6.84 percent, down from 7.45 percent in January. Banks participate in auctions to invest in the bills through which the government borrows for budgetary expenditures. The five-year Treasury bond yield fell to 8.20 percent in February from 8.29 percent in January, according to central bank data.
According to the data of the central bank, at the end of June 2022, the amount deposited as securities by the government banks was Rs. 3 lakh 22 thousand crores. At the end of December, its amount decreased to 2 lakh 72 thousand tk. In these six months, the government’s liabilities to the banks have decreased by about 50 thousand crores.
A central bank official said that the amount filed as government securities has decreased, meaning the government is repaying more debt. In the seven months of the current financial year, the government has taken a loan of Tk 46 thousand crores from the central bank. With this loan, the government has repaid the previous Tk 11,000 crore loan to the banks. He also said that the government is supposed to take a loan of Rs. 16,000 crore from the banking sector to meet the deficit of the current financial year. Till now, instead of taking a net loan from the banks, they have repaid 11 thousand crore rupees. which means the government is not borrowing because of the liquidity crisis of the banks.
Bangladesh Bank has provided more than $10 billion in financial facilities during the period July 2018 to January 2022–23 to stabilize the foreign exchange market and help banks meet their import spending obligations. Dollar selling brought foreign exchange reserves down to $32.60 billion on February 15 from a record of $48.6 billion in August 2021.
