BB cautions banks over lending to avert risk

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FE Report
The central bank has asked commercial banks to maintain caution in lending by ensuring the quality of assets to avoid any financial risk.
The Bangladesh Bank (BB) took the move against the backdrop of the global financial crisis that has already hit banking sectors in different countries across the world, officials said.
The instruction came at a meeting with the Association of Bankers, Bangladesh (ABB) held at the central bank Sunday with BB Governor Salehuddin Ahmed in the chair.
"We've asked the bankers to maintain the required advance-deposit ratio and ensure quality of assets for avoiding any risk," the central bank chief told reporters after the meeting.
Credit flow to the private sector grew 26.96 per cent as on August 14 last while the growth in deposits with the country's banking system reached 17.72 per cent, according to the central bank statistics.
He said the central bank also asked the bankers to stop unhealthy competition, particularly in collection of fresh deposits that also influences the interest rates on lending.
The BB governor congratulated the bankers for consolidating the local banking sector to stave off the possible shock of the global financial crisis.
He said the central bank has advised the bankers to invest in productive sectors like agriculture, housing and Small and Medium Enterprises (SMEs) to create employment opportunities.
"We've asked the bankers to follow a cautionary policy in lending to non-productive sectors that may create an inflationary pressure on economy," Mr. Ahmed added.
The BB instruction came against the backdrop of a rising credit flow to unproductive sectors, mostly through offering credit cards and consumer financing over the last one year.
The growth in credit for buying goods using credit cards rose significantly by 121.05 per cent in June last from that of the corresponding period of the previous year while credit for purchasing consumer goods increased by 93.30 per cent.