The excess liquidity with the commercial banks stood at Tk 93.37 billion in April this year, which could be used for expansion of credit to the private sector, Bangladesh Bank said in a report on Thursday.
"The excess of liquid assets over statutory liquidity ratio (SLR) i,e., Tk 93.37 billion are the potential loanable funds that scheduled banks could use for further expanding credit to the private sector," the Bangladesh Bank (BB) said in an analysis, released on the day.
The report on liquidity position, credit-deposit ratio of the banks as of April 4 last was prepared by the Department of Off-Site Supervision of the central bank.
The BB released the report after concern over liquidity shortfall in the banking sector was aired by both bankers and businessmen.
They alleged that some loan proposals are not being materialised by the banks, particularly in private commercial banks (PCBs), due to liquidity shortfall.
"The local private and foreign bank groups are seen to have the widest room for further expanding loan and advances by drawing down their substantial pools of excess liquidity," the report said.
Holding excess liquidity in approved securities instead of using the funds for customer lending represents a conscious choice in risk adjusted return, it added.
"Approved securities are zero risk rated, while loans to customers carry risk of repayment default. So long as the yields on risk free approved securities are no worse than the risk adjusted returns on customer lending bearing higher interest rates but also carrying default risks, banks tend to hold excess liquidity in approved securities; drawing this down as and when private sector investment activities present new opportunities of lending to viable creditworthy projects," the report noted.
Meanwhile, the excess liquidity in the banking sector fell by Tk 28.60 billion or 23.45 per cent in April 30 last over the previous month, according to the central bank statistics.
The amount of excess liquidity of all commercial banks dropped to Tk 93.37 billion as on April 30 from Tk 121.97 in March this year, the BB's data showed.
According to statistics, the excess liquidity of the state-owned banks (SCBs) stood at Tk 19.87 billion as on April 30, 2008, while that of the private commercial banks (PCBs,) was at Tk 43.58 billion. The excess liquidity of the foreign banks was Tk 17.97 billion at the same time.
The huge amount of excess funds have already been invested in different sectors like bond market, treasury bills, agriculture credit and industrial term loans during the period to meet the country's overall credit demand, the central bank officials said.
