Amid the ongoing liquidity crisis coupled and low deposit, banks are now eying on over Tk 750 billion fund from government deposit to minimise their pressure on lending rate reduction, sources said.
As of February this year, deposits in the country’s banking sector stands over Tk 11.61 trillion.
Data from Bangladesh Bank shows, of the amount, deposit at state-run banks and financial institutions stands at Tk 756.56 billion while the central bank has another Tk 51.79 billion in its hands.
Bank chiefs, however, claimed, if they could borrow at a 6 percent interest rate then they can lend at a single digit as set by the government at no more than 9 percent.
Sources said non-banking financial institutions (NBFIs) along with the banks are also looking on the government deposit funds. At present, there are 34 NBFIs operates in the country. Only 14 of them can have this fund.
Banks are spending dollars to import products ahead of Ramadan, due by the first week of May, which results a growing decline in bank’s money meaning more liquidity crisis, sources said.
According to Bangladesh banks, a lending at a 10.50 percent rate took place in the inter-bank money market on Apr 3 as liquidity crisis somewhat hit the peak.
Back in December, 2014, the lending rate rose to maximums 9.75 percent.
Bankers, however, are concerned that country’s ongoing development activities will require spending from the government deposit that will increase the loan-deposit ratio, posing threat to the banks.
“Amount of fund, which banks have in their hands, is very little against the demand of the market. To cut down the lending rate, it’s a big obstacle in addition to the liquidity crisis,” said Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh, a platform of private banks' chief executives.
According to Rahman, more liquidity crisis will appear “when the government will withdraw deposit from banks for the sake of development activities.”
“Besides, government loan will rise through treasury bond,” he said.
However, some of the bank chiefs are not hopeful about the government deposit.
“Banks need to spend a 1 percent commission to get the fund from government deposit,” said a bank chief, who wishes to go unnamed.
This bank chief termed the 1 percent as ‘bribe’ saying “Banks can provide it, are getting the government deposit.”
Meanwhile, banks have taken sideways to get the government deposit.
Recently, a second generation bank secured Tk 2 billion of the government deposit with higher interest rate from a first generation bank.
Last August, several banks followed the same strategy when they took Tk 3 billion deposit from a bank, which operates in line with Islamic shariah.
Banks chiefs alleged that such situation arose due to the crisis of deposit amid lower interest rate.
So, banks are being tactical and private banks’ directors are securing deposit from other banks with higher interest rate using political influence, they said.