Bangladesh Bank will no more extend liquidity support to weak and troubled banks by printing money rather the process of rescuing them now will be different, says Bangladesh Bank Governor Dr Ahsan H Mansur.
He makes it clear that the central bank wouldn't opt for any desperate remedy like shutting down banks or printing money to feed them to keep alive.
Action will be taken against the irregularities, but it will be against the persons involved in the irregularities and not against their institutions, as there are many employment issues involved with every organisation.
The governor made the observations to journalists at the central bank headquarters after his meeting with business leaders, including the chief of the apex chamber-the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).
Dr Mansur said now the process of rescuing the weak banks would be different.
Accused persons cannot withdraw money from the banks. When the banking commission will be formed, the number of weak banks should be reduced or they should be merged to solve the problem. But it will not be wise to solve the problem relating to poor liquidity in the shariah-based bank by closing them or printing money.
The BB Governor said: "Withdrawal of deposit is the sovereign right of the depositor. If depositors do not feel safe, they will withdraw money.
"The government will not interfere there. If the depositors do not have confidence in the management of the banks, the banks cannot run. It is not always right to go to rescue such banks."
The business delegation, led by FBCCI president Mahbubul Alam, included former FBCCI president and BNP vice-chairman Abdul Awal president and BNP vice-chairman Abdul Awal Mintoo, BKMEA executive president Mohammad Hatem, Metropolitan Chamber of Commerce and Industry (MCCI) president Kamran T Rahman, Dhaka Chamber president Ashraf Ahmed, President of Textile Mill Owners Association (BTMA) Showkat Aziz Russel.
Former FBCCI presidents MA Kasem and Md Jasim Uddin also attended the meeting with the governor for stocktaking of the latest state of trade and business and economy.
The governor told the reporters that the businessmen expressed concern about the banking sector during the meeting-his first with the business community after taking office under the uprising-borne interim government.
He said the businessmen also wanted to know the position of the government regarding Islamic banks. "But we (Bangladesh Bank) are taking some time to take a proper decision in this regard. I am not doing anything to be popular in a hurry."
Dr Mansur said, "Whatever we do, those who are guilty will be caught. No businesses will be targeted. We have given this guarantee to the business leaders."
But, he asserted, action would be taken against the officials of any organisation if found responsible, "even it is found that Bangladesh Bank officials are also responsible".
The governor hinted that the formation of the banking commission would happen in one week or two.
He feels the ongoing monetary policy-contractionary be definition--is working properly. "It will be compressed a bit more, but not too much. "If things go well, the inflation situation will improve within seven to eight months."
The new custodian of the central bank expects the high inflation to come down to 5.0-6.0 per cent then.
He explained the BB policy that interest rates should be increased until inflation starts to decrease.
"We stand by this policy. Also, since the currency-exchange rate is fairly stable at present, this will also help in reducing inflation."
In case of repayment of loan, currently default is considered after 180 days from the date of payment of instalments. This happens to be international standards.
The FBCCI president, Mahbubul Alam, told the reporters on the central bank's ground floor that they would not favour those who "looted money" from the banks.
They welcome the move for the formation of banking commission.
They believe that there will be discipline in the financial sector once the banking commission is formed and its recommendations are implemented.
The FBCCI chief stressed a stable interest-rate regime and adequate supply of dollars for smooth operation of external trade.
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