The central bank has extended the implementation of the revised limit on advance-deposit ratio (ADR) by banks for additional six months aimed at keeping the money market stable, officials said.
Under the extended timeframe, the banks are allowed to implement the revised ceiling by September 30 instead of March 31, 2019.
"We've extended the timeframe further to execute the revised ADR limit, considering the overall market situation," a BB senior official told the FE.
"Such time extension will also help increase credit flow to the private sector, which will facilitate achieving 7.80 per cent economic growth by the end of this fiscal," the official noted.
The banks have also been asked to submit their specific action plans to the central bank's Department of Off-site Supervision (DOS) for bringing down the revised ADR limit at the required level within the new timeframe.
The banks, which have the ADR above the re-fixed limit, will have to submit monthly progress report to the Department within 10 working days of the following months, according to a notification issued by the Bangladesh Bank (BB) on Thursday.
The new timeframe came in more than a week of issuing policy for offshore banking operations in Bangladesh.
Under the new policy, the banks will have to comply with cash reserve requirement (CRR) and statutory liquidity ratio (SLR) rules for their offshore banking operations.
The banks will need more funds to comply with CRR and SLR rules of their offshore banking operations, the central banker said.
Bankers, however, welcomed the BB's latest decision, saying that it would offer a breathing space for the banks to comply with the revised ADR limit.
"It will help keep the market stable to some extent," Syed Mahbubur Rahman, chairman of Association of Bankers, Bangladesh (ABB), told the FE while explaining the possible impact on market following the time extension.
"We've to take a coordinated effort to improve deposit growth in the banking system," Mr. Rahman, also managing director and chief executive officer of Dhaka Bank Limited, said.
Meanwhile, the ADR of all banks climbed to 77.51 per cent as on December 31 last year from 75.88 per cent a year before.
The deposit growth rose to 11.07 per cent as on December last from 10.60 per cent a year before while credit growth stood at 14.07 per cent compared to 18.08 per cent.
The ADR of six state-owned commercial banks (SoCBs) stood at 58.10 per cent as on December 31, 2018 from 54.56 per cent a year ago.
All private commercial banks' ADR was found, on average, 85.93 per cent as on December 31 last against 84.68 per cent on the same day of previous year.
The ADR of nine foreign commercial banks came down to 62.41 per cent from 69.73 per cent.
However, the ADR of two specialised banks rose to 79.19 per cent during the period from 77.27 per cent as on December 31, 2017, according to the BB's confidential report.
Around 20 banks' ADR still remained beyond the regulatory limit, it was learnt.
On January 30 last year, the central bank slashed the limit of ADR to help check any possible liquidity pressure on the market due to the banks' 'aggressive' lending.
The ADR has been re-fixed at 83.50 per cent for all the conventional banks and at 89 per cent for the Shariah-based Islamic banks. The existing ratios are 85 per cent and 90 per cent respectively.
The banks had to adjust it gradually by June 30, 2018.
Later, the BB extended the deadline three times for implementation of the revised ADR.
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