Banks’ excess liquidity decreased by Tk8,128 Crore

In a meeting hosted by the Center for Zakat Management (CZM), a non-profit organization, on the final day of the two-day Zakat Fair 2023, Abdul Awwal Sarker, a former Executive Director of Bangladesh Bank (BB), stated that the integration of financial institutions’ CSR (corporate social responsibility) funds and Zakat funds could play a critical role in ensuring social security for the country’s underprivileged section. He said that there is also room to investigate the possible benefits of the two funds’ collaboration, given both seek to achieve similar goals.

A few of speakers, however, believe that establishing a link between the two funds is unnecessary since it would pose issues. Dr Salehuddin Ahmed, the former central bank chief, suggested separate management of the two funds, referring to an instance of improper use of CSR funds.

CZM Chairman Niaz Rahim, former NBR Chairman Dr Abdul Mazid, Chief Executive Officer of CZM Dr Mohammad Ayub Miah and Member Secretary of the fair organising committee AMM Nasiruddin were present, among others.

Source for more details:

The Financial Express

In January, deposits in the country’s banking industry increased by 6.14% year over year as opposed to 5.44% in December. In parallel, loans increased by 7 basis points. Loan growth year over year in January was 13.89% as opposed to 13.82% in December of last year.

Deposits in the banking industry have climbed by Tk86,000 crore through January of this year, while lending has increased by Tk1.72 lakh crore, according to figures from the central bank. In other words, bank loans have grown more quickly than deposits.

Deposit in the country’s banking sector fell by Tk1,398 crore in January compared to the previous month. The total deposits in the banking channel at the end of January stood at Tk14.88 lakh crore, down from Tk14.89 lakh crore in December.

The interest rate on deposits was raised in January by the majority of banks. Although it has risen as well, the interest on loans is still higher than that on deposits. As a result, banks’ interest income is lower now than it was in December. On 15 January, the central bank allowed the deposit interest rate cap of 6% to be withdrawn and the interest rate on consumer loans to be increased by 3%. Mainly after that, banks increase the interest rate to raise their deposits.

Source for more insights:

The Business Standard

The Bangladesh Bank has initiated the removal of the 9% interest rate cap and the implementation of market-based interest rates for loans. Bangladesh Bank’s Governor Abdur Rouf Talukder’s stated that they are developing a market based reference rate. Also, they will provide a range for loan rates.

For instance, if the reference rate is set at 9%, the possible corridor could be between 2% and 3%. Hence, banks may only charge an interest rate of up to 12%, the BB official stated on the condition of anonymity. Since April 2020, the ceiling has been upheld by the BB. The lending rate cap for consumer loans was loosened in January, allowing banks to raise rates by up to 3 percentage points. Citing the BB’s efforts aimed at restoring discipline in the foreign exchange market, Talukder said that the central bank was trying to keep the exchange rate stable.

According to the governor, the central bank has taken a number of steps to control rising inflation, which has remained high due to rising global commodity prices. According to them, thei r strategy is to intervene on the supply side while attempting to slow the growth of aggregate demand and this indicates that the central bank will subsidize the supply-side measures.

Source for more insights:

The Daily Star

Due to a liquidity crisis, commercial banks have been unable to provide the government with the funds it needs, thus it has continued to borrow from Bangladesh Bank. Consistently borrowing from the central bank by the government could increase inflation, which has stayed high over the past year.

Between July 1 and March 2 this fiscal year, the government borrowed Tk 50,043 crore from the central bank, according to the BB data. It borrowed Tk 31,403 crore in the entire fiscal year of 2021-22.

According to Zahid Hussain, a former chief economist of the World Bank’s Dhaka office, borrowing from the central bank typically increases inflationary pressure because it is essential for generating money circulation. Policy makers are currently arguing that if the government takes out a loan from a commercial bank, the expansion of private sector credit will have difficulties, which will ultimately slow GDP development. The current level of the reserves is the lowest since the financial year of 2016-17 when it stood at $33.49 billion.

Source for more insights:

The Daily Star

Bangladesh Bank recently permitted banks to exclude private sector power producers from the single borrower exposure limit when giving loans for the purchase of raw materials such as fuel oil.

Under the single-borrower exposure limit, banks may not lend more than 25% of their capital to a single person, firm, or business group. The ban, however, will not apply to independent power producers (IPPs) for running their plants. Banks must comply with the new rule until December of this year.

The Bangladesh Independent Power Producers Association (BIPPA) wrote a letter to the central bank governor, demanding that enough dollars be made available for power plants to import heavy fuel oil. According to the letter, the IPPs will require around $250 million each month from March through June of this year to acquire heavy fuel oil (HFO).

Source for more details:

The Daily Star

Deposit flow to Islamic banks in Bangladesh registered a fall in the fourth quarter of 2022, the first such decline in eight years, in a sign of erosion of confidence among savers owing to loan irregularities.

Data released yesterday by the Bangladesh Bank showed that total deposits in Islamic banks declined to Tk 409,949 crore at the end of December 2022, down 2.71 percent from Tk 421,375 crore in September. This means Islamic banks lost Tk 11,426 crore in deposits in the three months, according to the October-December quarterly report on Islamic banking of the central bank.

Source for more details:

The Daily Star