Saturday, 21 December, 2024
Seven financially troubled banks recently received Tk 6,585 crore in liquidity support from ten stronger banks, backed by guarantees from Bangladesh Bank (BB), in an effort to stabilize their operations without increasing currency circulation. Husneara Shikha, Executive Director and spokesperson for BB, disclosed on Thursday that this support leverages interbank lending under central bank assurances, avoiding any need for new currency issuance.
According to Bangladesh Bank data, nine private banks are grappling with acute liquidity shortages totaling over Tk 18,000 crore. First Security Islami Bank leads with the highest deficit of Tk 7,269.66 crore, followed by Social Islami Bank at Tk 3,394 crore, and National Bank with Tk 2,342 crore. Other banks facing significant shortfalls include Union Bank (Tk 2,209.15 crore), Islami Bank Bangladesh (Tk 2,201.95 crore), Bangladesh Commerce Bank (Tk 380.95 crore), and Global Islami Bank (Tk 39.39 crore). Padma Bank and ICB Islami Bank also face deficits of Tk 234.48 crore and Tk 95.42 crore, respectively.
In recent months, seven of these banks—newly freed from S Alam Group’s control—appealed to Bangladesh Bank for Tk 29,000 crore in liquidity support. Bangladesh Bank has since signed guarantee agreements with five of these banks, while two are awaiting finalization. These guarantees allow struggling banks to borrow from healthier banks under BB's protection.
Sources indicate that banks with negative current account balances are unable to clear cheques through the real-time gross settlement (RTGS) or Bangladesh Automated Clearing House (BACH) systems. Prior to new restrictions, however, banks linked to S Alam Group were reportedly able to settle cheques of any amount through special arrangements, a privilege capped at Tk 1 crore per cheque since August 14.
For nearly two years, these banks have struggled to meet statutory liquidity requirements, using all available assets as collateral with the central bank, effectively barring further loans from any source. Additionally, they have been unable to cover fines related to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) shortfalls.
During the prior Sheikh Hasina administration, banks linked to S Alam were reportedly allowed to conduct transactions despite significant deficits. However, following the recent transition to an interim government, Bangladesh Bank dissolved the boards of 11 banks, including seven linked to S Alam, to initiate a restructuring process. This restructuring follows the discovery of significant loan outflows from these banks under various names during the preceding administration.
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Seven financially troubled banks recently received Tk 6,585 crore in liquidity support from ten stronger banks, backed by guarantees from Bangladesh Bank (BB), in an effort to stabilize their operations without increasing currency circulation. Husneara Shikha, Executive Director and spokesperson for BB, disclosed on Thursday that this support leverages interbank lending under central bank assurances, avoiding any need for new currency issuance.
According to Bangladesh Bank data, nine private banks are grappling with acute liquidity shortages totaling over Tk 18,000 crore. First Security Islami Bank leads with the highest deficit of Tk 7,269.66 crore, followed by Social Islami Bank at Tk 3,394 crore, and National Bank with Tk 2,342 crore. Other banks facing significant shortfalls include Union Bank (Tk 2,209.15 crore), Islami Bank Bangladesh (Tk 2,201.95 crore), Bangladesh Commerce Bank (Tk 380.95 crore), and Global Islami Bank (Tk 39.39 crore). Padma Bank and ICB Islami Bank also face deficits of Tk 234.48 crore and Tk 95.42 crore, respectively.
In recent months, seven of these banks—newly freed from S Alam Group’s control—appealed to Bangladesh Bank for Tk 29,000 crore in liquidity support. Bangladesh Bank has since signed guarantee agreements with five of these banks, while two are awaiting finalization. These guarantees allow struggling banks to borrow from healthier banks under BB's protection.
Sources indicate that banks with negative current account balances are unable to clear cheques through the real-time gross settlement (RTGS) or Bangladesh Automated Clearing House (BACH) systems. Prior to new restrictions, however, banks linked to S Alam Group were reportedly able to settle cheques of any amount through special arrangements, a privilege capped at Tk 1 crore per cheque since August 14.
For nearly two years, these banks have struggled to meet statutory liquidity requirements, using all available assets as collateral with the central bank, effectively barring further loans from any source. Additionally, they have been unable to cover fines related to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) shortfalls.
During the prior Sheikh Hasina administration, banks linked to S Alam were reportedly allowed to conduct transactions despite significant deficits. However, following the recent transition to an interim government, Bangladesh Bank dissolved the boards of 11 banks, including seven linked to S Alam, to initiate a restructuring process. This restructuring follows the discovery of significant loan outflows from these banks under various names during the preceding administration.
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