BB governor urges banks not to collect deposits aggressively

Bangladesh Bank Governor Fazle Kabir has urged the banks not to collect deposits aggressively by offering high interest rates.

Staff Correspondentbdnews24.com
Published : 17 Feb 2018, 07:45 PM
Updated : 17 Feb 2018, 08:01 PM

“There is no liquidity crisis. So, I request the bankers not to collect deposits on high interest rates,” Kabir told the annual business conference of the state-owned Agrani Bank at a Dhaka hotel on Saturday.  

He alleged ‘some people’ were trying to put the entire banking sector into disarray by using the liquidity crisis at a private bank. He did not name the bank.

“A meaningless panic has been created over advance-to-deposit ratio. I don’t see any reason behind this (panic). It’s baseless,” he said.  

Advance-to-deposit ratio or ADR measures loans as the percentage of deposits for commercial banks.

Finance Minister AMA Muhith, State Minister for Finance and Planning MA Mannan, Financial Institutions Secretary Eunusur Rahman, Agrani Bank Chairman Zaid Bakht, and Managing Director Mohammad Shams-Ul Islam, among others, delivered speeches.

MD Shams said Agrani Bank was the only state-owned bank that had no deficit in the deposit. Its operating profit almost doubled in 2017 than the previous year, according to him.

Bangladesh’s banking sector, however, is not in good condition after being hit by a number of loan scams.

According to the central bank’s latest data, the total amount of bad loan in the banks in Bangladesh is around Tk 1.25 trillion.

Recently, the government has faced huge criticism over lending a single industrial group more than Tk 50 billion.

The Farmers Bank loan scam also drew much criticism for the government as it cleared the licence of the troubled bank on political consideration.

Bankers are also criticising the recent central bank decision to lower ADR by 1.5 percentage points to 83.5 percent.

They started to collect deposits by raising interest rates.

In 2013, the average interest rate on deposit was 8.68 percent. It dropped gradually to 4.9 percent in November last year.

After lowering the ADR, South Bangla Agricultural and Commerce Bank raised the interest rate of its deposit premium scheme to 11 percent. The bank is offering 9.5 percent interest on fixed deposit receipt or FDR.

AB Bank has raised the interest rate on monthly deposit scheme from 7.75 percent to 9.5 percent.

Other banks also raised interest rates on deposits at similar rates.