One more a year passed with sluggish growth in deposits in the banking system, though different measures were taken by the government and the central bank to improve the situation.
Lower deposit growth is creating liquidity pressure on the money market gradually, which may also put an adverse impact on the overall banking business in 2019 unless the situation improves shortly.
Most of the time in the outgoing year, the banks, especially private lenders, faced liquidity pressure mainly due to higher credit growth than that of deposits.
The deposit growth came down to 10.45 per cent in October from 10.60 per cent in December 2017 while the credit growth stood at 15.19 per cent compared with 18.08 per cent.
Besides, the overall credit growth in the banking system recorded a higher growth than that of deposit in the last three years.
The deposit growth had been on a fall, sliding from 13.13 per cent on December 31, 2016 to 10.60 per cent as on December 31 last calendar year. It was 13.66 per cent as on December 10, 2015.
On the other hand, credit rose to 18.08 per cent, as on December 31, 2017 from 15.32 per cent a year earlier. It was 12.74 per cent as on December 10, 2015.
Earlier on January 30, the Bangladesh Bank (BB) slashed the limit of advance-deposit ratio (ADR) on Tuesday to help check any possible liquidity pressure on the market due to the banks' 'aggressive' lending.
The ADR is re-fixed at 83.50 per cent for all the conventional banks and at 89 per cent for the Shariah-based Islamic banks. The existing ratios are 85 per cent and 90 per cent respectively.
The banks having ADR above re-fixed limit are allowed to implement the revised limit of ADR by March 31, 2019 instead of December 31, 2018 earlier.
Most of the banks had faced liquidity pressure following announcement of revised ADR.
After more than two months of revising ADR, the central bank slashed the cash reserve requirement (CRR) by 1.0 percentage point to 5.50 per cent, enabling all the scheduled banks to use Tk 101 billion additional funds.
Moreover, the decision was taken at a tripartite meeting of the Ministry of Finance, BB and the Bangladesh Association of Banks (BAB) in the capital on April 01 to help mitigate the current liquidity crunch in the banking system.
The process of slashing CRR was criticised by different quarters, saying that it was not a right step.
The government had also allowed the state entities to deposit 50 per cent of their funds with the PCBs, up from the earlier ceiling of 25 per cent on the same ground.
On the other hand, the bank owners' lobbyist group had decided to bring down the interest rates on both lending and deposit at 9.0 per cent and 6.0 per cent respectively from July 01.
Senior economists and experts strongly opposed the BAB decision, saying the fixation of interest rates is beyond the jurisdiction of the association.
The BB's data showed the deposit mobilisation in the banking sector was hampered as most of the banks cut their interest rates on deposit in line with the BAB decisions.
All banks' deposit growth came down to 10.25 per cent in September from 11.29 per cent three month ago, according to the central bank's confidential reports.
The enhancement of deposit growth is a big challenge for both regulators and bankers if the higher interest rates on the government savings certificates and the postal saving instruments continue.
Currently, average interest rate on deposits, offered by the commercial banks, is around 7.50 per cent, while the rate for savings tools averaged 11.50 per cent.
The higher growth of non-performing loans (NPLs) has, however, been treated as the number one problem in the banking sector, which is pushing down the overall financial health of banks gradually.
The amount of classified loans in the country's banking sector reached an all-time high of nearly Tk 1.0 trillion in September ahead of the national polls.
The volume of non-performing loans (NPLs) jumped by nearly 34 per cent or Tk 250.67 billion to Tk 993.70 billion as on September 30, from Tk 743.03 billion as on December 31, 2017 despite close monitoring of the central bank.
The share of classified loans also rose to 11.45 per cent of the total outstanding loans during the period under review from 9.31 per cent nine months ago.
The default loans include substandard, doubtful and bad/loss of total outstanding credits, which stood at Tk 8,680.07 billion as on September 30, 2018, from Tk 7,981.96 billion as on December 31, 2017. It was Tk 7,527.30 billion as on September 2017.
Meanwhile, overall shortfall in provisioning against loans in the country's banking system swelled by over 20 per cent or Tk 13.60 billion during the first nine months of 2018.
The total amount of provisioning shortfall rose to Tk 81.27 billion as on September 30 from Tk 67.67 billion nine months ago mainly due to higher growth of the NPLs.
The Association of Bankers Bangladesh (ABB), an apex forum of the country's chief executives of the both public and private commercial banks, organised a press briefing this month to highlight the development of the country's banking sector.
The programme was organised, days after the recent Centre for Policy Dialogue (CPD) discussion that voiced concerns over thw scams in the banking sector.
At the meeting, the CPD said the country has lost Tk 225.02 billion during the last 10 years to scams, irregularities and heists.
Terming the banking sector "hero" that contributes to the national exchequer, the top bankers said it is the highest taxpayer in the country and it should not be demeaned as a villain.
They had called for constructive criticism of the banking sector, saying that they lose morale if negative issues are highlighted.
The next government should address the issues of banking sector with top priority to help the country's ongoing economic activities to move forward.
siddique.islam@gmail.com