Banks' idle money declining fast

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Sheikh Shahariar Zaman
Excess reserve with Bangladesh Bank fell by Tk 53 billion in two months with November alone witnessing a decline of Tk 30 billion, indicating a return of normalcy in the economy.
The reserve was as high as 98 billion on July 1, it came down to Tk 95 billion on October 1 and on November 1 it was Tk 72 billion, but it came down to Tk 42 billion on November 23, according to central bank data.
The excess reserve is the hard cash deposited by commercial banks in addition to cash reserve requirement and it lies idle with the central bank and bears no return.
"The banks are doing very well and now they need money as they have found investment and lending scopes," managing director of Mutual Trust Bank (MTB) Anis A Khan told the FE.
"Some of the money are spent on buying treasury bonds and some went to lending," he said adding, "My bank alone lent about Tk 3.0 billion in three months."
An economic turnaround will not put pressure on deposit rate, and lending rate will remain stable, he hoped.
"It is true, demand for money will increase when the economy will start functioning in full swing, but it is expected that the banks will not increase the deposit rates in a bid to rope in funds," he said.
MTB has reduced the agriculture lending rate to 12.75 per cent from 13 per cent as it is managing its liabilities very prudently, he added.
The banks have sufficient liquidity and call rate is only 4.0 to 5.0 per cent this year, Mr Anis said.
A senior central bank official said it is a very positive sign that the amount is decreasing as the banks keep the money with the central bank for lack of investment or lending scope.
"The idle money remains at Tk 15 billion to Tk 20 billion level when the economy performs normally," he said.
The country experienced sluggishness in economy due to global recession and fall in both value and volume of the exports. But there is now a sign of recovery, the official said.
The opening of letters of credit (LCs) is also on the rise as investors expecting a turnaround in the global economy, he added.
The LC opening in October was worth $2.0 billion, which was $1.37 billion in the same month of the last year, and in the first three weeks in November $1.5 billion worth of LCs were opened compared with $1.17 billion in the same period of the last November.