SoCBs to put idle funds in government bonds

Concerned over the excess liquidity of state-owned commercial banks (SoCBs) the government is going to ask them to invest the idle money in treasury bonds, sources have said.

"The SoCBs have a good volume of excess liquidity. If the money is not invested somewhere, these banks may incur heavy losses, because, they will have to pay profits to the depositors," a senior official of the ministry of finance (MoF) told the FE.

"So, we want the money to be invested in treasury bonds and other profitable sectors so that the banks can avoid possible financial losses," he said.

The official also said no big loans had been disbursed due to the political unrest during the last couple of months and it led to the buildup of idle money.

Unless the money was invested, it would not provide any return, he said.

Until November last the SoCBs' excess liquidity stood at Tk 343.94 billion against the entire banking sector's excess liquidity of Tk 901.658 billion.

Another senior MoF official said banks could invest up to 81 per cent of their liquidity. Until November last the Sonali Bank invested 49 per cent, Janata Bank 63 per cent, Agrani Bank 63 per cent and Rupali Bank 61 per cent of their liquidity.

He said Sonali Bank is the largest one in the country. If a significant portion of its fund remains idle, the bank will incur a heavy loss and employment generation will be affected.

Officials said investment proposals marked a sharp decline in 2013 due to the unfavourable business environment caused by the political unrest centring on the January 5 national elections.

Last year investment proposals registered with the Board of Investment (BoI) -- local and foreign -- declined by 27 per cent and 10 per cent respectively.

A senior MoF official, however, expressed hope that since the political situation had calmed down after the national elections, entrepreneurs would come forward with fresh investment plans which would reduce the volume of idle money in the banks and financial institutions.

When contacted, president of Bangladesh Textile Mills Association Jahangir Alamin told the FE that long-term investment would depend on the availability of gas and power alongside other infrastructural needs apart from money.

"If the government can make these facilities available, fresh investments will take place reducing the excess liquidity," he said.

He, however, pointed out that since the local currency Taka became strong against the US dollar, the demand for money also declined to some extent.

But there were no other options but to make the gas and power supplies available and ensure infrastructure for big investments, he reiterated.