Concern expressed by bankers' association

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The association of bankers representing the private commercial banks operating in the country, expressed their concern recently about difficulties being created for the functioning of the banks. They pointed to new rules and regulation that have been rather superimposed on them, without the necessary consultation, which are causing serious hindrances to smooth banking operations.
One main casualty of the present state of affairs has been the deposit situation of banks. The deposits are seen to be declining although the same have not yet created a liquidity crisis. But the bankers' association expressed worry that a liquidity crisis could be created at some stage if the banks are not allowed freedom to stop what are considered as harassments of their clients.
The new requirements are causing fright among the banks' customers. The rate of new accounting opening has declined. According to newspaper reports, even those who operated pension deposit schemes (DPS) in the banks withdrew an unprecedented amount of Taka 1,000 crore during the last three months. Thus, according to the association, it is a question of time only when the banks will face a serious liquidity problem .
The consequences of a liquidity shortage should be obvious. Less money in their hands will force the banks to decrease their lending to borrowers and to increase the rate of interest on lending. On the one hand, the total volume of credits available to the private sector will be squeezed and, on the other, the lending rate going up would discourage borrowing. Thus, the investment operations in the economy as a whole could take a nosedive from less availability of credits or investors getting disheartened by the high rate of interest charged for lending. The slump in investment operations, thus, could slow down the economy with adverse repercussions on employment, income and the poverty situation.
Therefore, the banks should be allowed to operate pragmatically with the least burdens. Swift and surgical policies in the economic realm usually prove to be counter-productive. Realising this well in time, the government should allow the banks' management the freedom and discretion to operate so that the banks' customers can shake off their nervousness and distrust and resume their previous normal relationships with the banks.

Zahid Hossain
Uttara, Dhaka