BB asks PCBs to increase deposits, cut dependence on money market

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FE Report
The central bank of Bangladesh asked Thursday commercial banks to increase deposits and thus reduce dependence on the money market that will also help minimise their credit-deposit ratio, officials said.
The instruction came at the Bangladesh Bank's (BB) review meeting with chief executive officers of two private commercial banks (PCBs) held at the central bank with BB Deputy Governor Murshid Kuli Khan in the chair.
The BB took the move against the backdrop of a rise in the credit-deposit ratio (CDR) to around 100 per cent in the banking sector indicating a higher credit growth against deposits.
'We've asked the banks to invest in productive sectors and keep the investments in unproductive sectors at a reasonable level,' a BB senior official told the FE.
The growth in credit flow to the private sector had recorded a significant rise of 25 per cent in the fiscal 2008 (FY08) against that of the previous year.
Credit flow to the private sector rose by 25.18 per cent to Tk 379.62 billion (37,962 crore) throughout the FY08 against a growth of 15.12 per cent to Tk 197.98 billion of the previous fiscal, according to the central bank statistics.
He also said the central bank took the move aiming to keep stable the country's money market through reducing dependence of banks on the market.
During the meeting, the PCBs have been asked to refrain from aggressive banking and improve efficiency by minimising their credit-deposit ratio, the officials concerned said.
As part of the move, the BB will sit with two more PCBs Sunday next to exchange views on asset-liability management and the latest position of implementation of the core risk guidelines.
The central bank earlier had identified five core risk areas in the country's banking sector, namely, credit, asset and liability, foreign exchange, internal control, and compliance and money laundering.