A feel-good situation begins for liquidity-strapped banks as seven of the crisis-ridden commercial lenders so far secured guaranteed cash supports of over Tk 40 billion, sources said.
In fact, the approved cash support under the Bangladesh Bank's liquidity-support guarantee programme is too little to meet their growing local-currency obligations. But an inordinate delay in fund disbursement creates some sort of problems for the banks to stop rising flow of panic withdrawals, executives of the banks said.
As banks' liquidity depleted fast following loan-related irregularities and panic withdrawals, several cash-hungry ones approached the regulator and managed to obtain its nod to play guarantor for banks in failure of repaying credit borrowed from cash-surplus banks.
Of the banks, National Bank Limited (NBL), First Security Islami Bank Limited (FSIBL), Islami Bank Bangladesh, Global Islami Bank (GIB), Social Islami Bank Limited (SIBL), Union Bank, and EXIM Bank bagged the guarantee-backed fund support.
According to the statistics of the BB, the country's central bank, six banks - Sonali Bank, City Bank, Mutual Trust Bank, Dutch-Bangla Bank, Eastern Bank and Bengal Commercial Bank-under the guarantee-backed liquidity-support scheme gave Tk 40.65 billion to the six liquidity-starving banks until October 16.
Of the amount, SIBL received Tk 9.0 billion, NBL Tk 8.20 billion, Islami Bank Bangladesh Tk 8.0 billion, FSIB Tk 7.50 billion, EXIM Bank Tk 4.0 billion, GIB Tk 2.45 billion and Union Bank Tk 1.50 billion.
Seeking anonymity, a BB official said more liquidity support by lender banks is in the pipeline to breathe life into the badly crisis-ridden banks under the bailout arrangement.
"So, it will be a comprehensive cash-support programme backed by the central bank guarantee, and we'll gradually release funds observing the state of the weaker banks," the BB official said.
Responding to a question, the central banker said the disbursement of funds might take few days by the lender banks due to some formal procedures.
Talking to the FE, Managing Director and Chief Executive Officer of National Bank Limited Md. Touhidul Alam Khan said, "We have received funds from various banks under the Bangladesh Bank Liquidity Support Guarantee. However, delays in fund disbursement have created increased demand."
He said currently, customers are rushing to withdraw their money due to heightened panic. "We are managing withdrawals through careful rationing and in accordance with the BB guidelines for fund utilisation and monitoring."
The banker thinks such panic could have been avoided if they had received the funds on time as per their initial approach and the situation now became increasingly challenging to manage.
"We are putting forth our best efforts in recovery and pursuing serious legal actions to recover non-performing loans," noted the MD & CEO of National Bank.
Chairman of FSIBL Mohammad Abdul Mannan said they demanded Tk 79.0 billion of cash supports to revive the unconventional bank from the prevailing crisis for no fault of their own.
But they have so far received Tk 7.50 billion, which is around 10 per cent of their requirements.
"We are now using the funds to maintain day-to-day banking affairs. We need to clear some large payments. So, we need more money as quickly as possible to clear the payments that will help regain confidence of our clients through stopping panic cash withdrawal," the bank's chairman said.
"If we get the funds in time, we will be able to overcome the prevailing crisis within a span of six months," the experienced banker added.
Dr M Masrur Reaz, an economist and chairman of the Policy Exchange of Bangladesh, says liquidity support on a continued basis for a longer period of time is neither feasible nor effective because such supports cannot alone solve the deep problems the ailing banks are in.
"So the liquidity support needs to be well-targeted, performance-linked and should be treated as a short-gap measure," he suggests.
During the stop-gap measure, the economist says, the entire operations of the banks need to be restructured rolling out a performance-recovering plan and the plan should indicate what it will take for the banks to get back into a stronger position.
"Depending on that time, I think the central bank should facilitate recapitalisation of these banks through the issuance of debt-and capital- market instruments like bonds which are to be issued by particular banks."
As the perceptions about the banks are not good in the market, he notes, the central bank in order to encourage investment into the debt- and equity-market instruments can facilitate some forms of guarantee either directly or through a large state-owned bank or very reputed securities underwriters.
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