BB starts talks with banks to minimise credit-deposit ratio
FE Report | Thursday, 26 June 2008
The Bangladesh Bank (BB) has started consultations with the commercial banks aiming to improve efficiency by minimising their credit-deposit ratio, officials said.
Under the move, the central bank recently met executives of eight commercial banks to exchange views on the performance of asset-liabilities management and the latest position on implementation of core risk guidelines.
"We will meet with three more commercial banks shortly to discuss the matter," a BB senior official told the FE Wednesday, adding that the central bank took the move aiming to keep the money market stable.
The BB took the move against the backdrop of the rise in credit-deposit ratio (CDR) to 109 per cent in the banking sector indicating a higher credit growth against deposit.
Meanwhile, the excess liquidity in the banking sector fell by Tk 28.60 billion or 23.45 per cent in April 30 last over the previous month, according to the central bank statistics.
The huge amount of excess funds have already been invested in different sectors like bond market, treasury bills and industrial term loans during the period to meet the country's overall credit demand, they added.
The amount of excess liquidity of all scheduled banks dropped to Tk 93.37 billion as on April 30 from Tk 121.97 in March this year, the data showed.
According to statistics, the excess liquidity of the state-owned banks (SCBs) stood at Tk 19.87 billion as on April 30, 2008, while that of the private commercial banks (PCBs,) was at Tk 43.58 billion. The excess liquidity of the foreign banks was Tk 17.97 billion at the same time.
"The excess of liquid assets over statutory liquidity ratio (SLR) i,e., Tk 93.37 billion are the potential loanable funds that scheduled banks could use for further expanding credit to the private sector," another BB official said.
He also said holding excess liquidity in approved securities instead of using the fund for customer lending represents a conscious choice in risk adjusted return.
"The government-approved securities are zero risk rated, while loans to customers carry risk of repayment default," the official noted.
Under the move, the central bank recently met executives of eight commercial banks to exchange views on the performance of asset-liabilities management and the latest position on implementation of core risk guidelines.
"We will meet with three more commercial banks shortly to discuss the matter," a BB senior official told the FE Wednesday, adding that the central bank took the move aiming to keep the money market stable.
The BB took the move against the backdrop of the rise in credit-deposit ratio (CDR) to 109 per cent in the banking sector indicating a higher credit growth against deposit.
Meanwhile, the excess liquidity in the banking sector fell by Tk 28.60 billion or 23.45 per cent in April 30 last over the previous month, according to the central bank statistics.
The huge amount of excess funds have already been invested in different sectors like bond market, treasury bills and industrial term loans during the period to meet the country's overall credit demand, they added.
The amount of excess liquidity of all scheduled banks dropped to Tk 93.37 billion as on April 30 from Tk 121.97 in March this year, the data showed.
According to statistics, the excess liquidity of the state-owned banks (SCBs) stood at Tk 19.87 billion as on April 30, 2008, while that of the private commercial banks (PCBs,) was at Tk 43.58 billion. The excess liquidity of the foreign banks was Tk 17.97 billion at the same time.
"The excess of liquid assets over statutory liquidity ratio (SLR) i,e., Tk 93.37 billion are the potential loanable funds that scheduled banks could use for further expanding credit to the private sector," another BB official said.
He also said holding excess liquidity in approved securities instead of using the fund for customer lending represents a conscious choice in risk adjusted return.
"The government-approved securities are zero risk rated, while loans to customers carry risk of repayment default," the official noted.