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Published : 28 Nov 2024, 11:59 PM
The Bangladesh Bank, or BB, has directly injected Tk 225 billion into banks facing a severe liquidity crunch, after long resisting calls to print money to manage the country’s financial crisis.
On Thursday, Governor Ahsan H Mansur said the central bank has backed down from its earlier stance against printing money to stabilise the banking system.
However, he emphasised this is a temporary measure to help struggling banks.“Earlier, I had said that I would not print money. However, I have temporarily backed away from that matter, not completely.”
“The money of the customers is safe. Tk 225 billion has been provided to the banks facing liquidity crisis,” said Mansur.
After the fall of the Awami League government, news of the deteriorating condition of some banks controlled by the previous beneficiaries led to an onrush of customers withdrawing money from those banks.
In particular, S Alam Group, the Chattogram-based business conglomerate that wielded influence during the tenure of the deposed Sheikh Hasina regime, withdrew large sums of money from the banks under their control before and after the fall of the government.
Even during the change of power, there were reports of people associated with the interests of that group withdrawing money. These reports triggered a wave of panic withdrawals by customers of those banks.
However, the banks were unable to provide it and there has been no improvement in the situation since the previous government was toppled on Aug 5.
Due to lack of cash, First Security Islami Bank, Global Islami Bank, Social Islami Bank, National and several other banks are unable to give money as per the demand of the customers.
Under the circumstances, the central bank took measures to support weak banks by borrowing money from strong banks as a guarantor. Nearly Tk 70 billion was pumped into at least six or seven banks in several instalments.
However, the amount has fallen significantly short given the actual needs of the struggling banks.
According to recent reports, the central bank printed money and directly injected it into six weak banks on Nov 25.
Earlier, on several occasions, Mansur had said the central bank would not help these banks by printing money to control the rising inflation.
"Bangladesh Bank will withdraw this money through the bill. The main reason for issuing the bill is that the central bank is providing liquidity support with one hand, and withdrawing liquidity from the other."
When asked about the difference between the support given to the central bank during the previous government and the support given now, he said: "The board has changed, and money theft has stopped. Millions have been taken out. This will not happen again."
According to the governor, every bank and their performance is being reviewed.
"What happened before was like asking your father for a lollipop. They asked for money and they gave it. There was no accountability. Tk 300 billion was given to the Islamic Bank itself. What was the benefit of that? The money has been laundered to Singapore. Now, that will not happen again."
"The net basis of money is not being increased. It will not increase inflation, which is not against monetary policy."
On Wednesday, the Bangladesh Bank withdrew Tk 4.52 billion through bills. Officials said money was withdrawn through them by introducing new 90 and 180-day bills. They also stated that this measure has brought some liquidity to the central bank's vault.
At the press conference, the governor said he was determined to restore the confidence of customers of some banks.
Vowing that the central bank and the government would protect the interests of depositors, Mansur emphasised that every depositor should feel that their money is safe in the bank.
According to the BB governor, money will be available in all banks as per demand from Sunday."Bangladesh Bank is following a tight monetary policy. It will remain tight like this.”
He added this money will be withdrawn in the next few weeks.
