The Bangladesh Bank chief binned the notion of the liquidity crunch affecting the banks’ lending, saying the country's banking sector had sufficient liquidity.
"There is no liquidity crisis. Rather, we found excess liquidity to the tune of Tk 86,616 crore [866.16 billion] at banks till June 2019 after maintaining CRR (cash reserve requirements) and SLR (statutory liquidity ratio) provisions," Governor Fazle Kabir said on Wednesday (Jul 31).
Expressing his wonder, Kabir said he experienced reverse reactions from different quarters, including media, over the central bank’s regulatory measures involving financial entities, or individuals.
“We did not liquidate Farmers Bank. Rather, we tried to help the bank to survive by extending capital support from state-owned banks of Sonali, Agrani and others. People and media criticized us in a negative way for doing so,” he while replying queries from the media after unveiling the monetary policy for the current fiscal year.
“Now we have initiated liquidation move of People's Leasing and Financial Services (PLFS) Limited and critics including media friends again came up with negative criticism against central bank. This reverse attitude of critics towards central bank has really surprised me," he said, adding the central bank was on the right track in discharging its duty.
The governor said the PLFS's liquidation would not affect the financial sector.
"PLFS and some other non-bank financial institutions (NBFIs) have been going through trouble due to liquidity shortfall. We are on the course of liquidating PLFS and asked others to reorganize boards and undertake fresh plans to accelerate their financial operation," he said.
Turning to liquidity issue again, the governor said the central bank took necessary measures from time to time to address liquidity shortfall of some weak private banks and the practice would continue in the coming days.
The governor said a mismatch had been detected in liquidity status of banks as some banks had sufficient liquidity while some others did not.
The central bank left key interest rates unchanged with the governor saying it aimed to achieve record economic growth while curbing inflationary pressures.
He said the policy would aim to keep average inflation within 5.5 percent in FY20, while achieving the government’s record 8.2 percent growth target.
The bank left the policy repo rate at 6 percent and the reverse repo rate at 4.75 percent.