Exchange, interest rates to be market-driven

Bankers are assured that the money market will function freely based on demand and supply, sans too many interventions like in the past.
New Bangladesh Bank (BB) governor Dr Ahsan H. Mansur gave the assurance Monday to top executives of a group of leading commercial banks, now that banking and financial sector passes through changes under the interim government.
Instead of applying too many interventions that the previous regime of the central bank led by immediate-past governor Abdur Rouf Talukder often exercised bypassing the market dynamics, the new governor told the bankers, exchange and interest rates would be determined by the market.
Chairman of The Association of Bankers Bangladesh Limited (ABB), an apex body of top executives of the country's commercial banks, Selim R. F. Hussain told few reporters about the outcomes of the meeting with the governor on Monday at the BB headquarters.
Managing directors of five private commercial banks, three state-owned and three foreign commercial lenders were present at the meeting with the recently appointed governor of the banking regulator.
Hailing the appointment of Dr Mansur--who had once served the IMF-- as the BB governor, he said he is a really professional macroeconomic person who has the capacity of taking the reeling banking sector to the next level through resolving many of the obstacles the industry now facing.
Highly criticising the roles of the central bank for the last several years, the ABB chairman said the whole banking industry was being destroyed for the last several years and a certain senior officials of the BB should be blamed for such situation.
"We have seen they (the BB officials concerned) were actively supporting various irregularities and non-compliance, which is why the sector today is in a much stressed-out situation," he said.
Asked why the ABB was not vocal against such malpractices, he said there was "no freedom of speech" and the decision-makers in the central bank were so powerful and influential. "Was that BB willing to listen to us? We did not have freedom of expression."
But the most encouraging part of the current BB governor is that he believes in free market and not in too many interventions for smooth functioning of the industry, he said.
About the monetary-policy aspect, he said the governor told them that the contractionary monetary policy will continue in the coming days to contain the higher inflationary regime.
Regarding the widening difference between the policy rate and the rate of government securities instruments, he said the government made a hint that it would lessen the gap through raising the policy rate in phases.
About the foreign-exchange reserves, Mr Hussain, also managing director and chief executive officer of BRAC Bank PLC, said the gross reserves now stood at $20 billion plus, which equals to three and a half months of import bills on average.
In respect to the NPL (non-performing loan) buildup, he said the governor instructed them to pay intensified attention to the cash recovery and asked the bankers to submit their proposals within the shortest possible time to reduce the burden of bad loans.
When his attention was drawn on struggling unconventional banks, the ABB chairman said these kinds of poorly-governed institutions should be allowed to "die" that is happening in the highly regulating markets.
Instead of doing so, the central bank keeps injecting funds into the banks not handled in a compliant way and worsened the situation, according to him.

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