Bangladesh Governor orders strong banks to lend to weak ones
The Governor of the Bangladesh Bank, Dr. Ahsan H. Mansur, has urged stronger banks to provide more financial assistance to banks that have weakened due to financial irregularities. He also announced that strict action will be taken against banks that delay the payment of letters of credit or LCs.
The Governor held a meeting with 17 commercial banks on Monday in November 11 and made these remarks. Husne Ara Shikha, Executive Director and Spokesperson of the Bangladesh Bank, confirmed this information.
The meeting was attended by MDs of state-owned Sonali, Rupali, Agrani, and Janata Banks and Managing Directors and CEOs of private sector Brac Bank, Eastern, City Bank, Mutual Trust, Dhaka Bank, Dutch-Bangla, Pubali, Prime Bank, NCC Bank, Mercantile Bank, Premier Bank, Jamuna, and South-East Bank.
The meeting discussed the dollar market, the situation of weak banks, credit card rates, write-off policies, mandatory diploma exams for bankers, and the overall economy.
Husne Ara Shikha said, "The Governor has called on banks with good liquidity to provide more liquidity support to banks in distress."
She said, "The Governor wanted to know if there were any challenges in the dollar market. The banks said that the dollar market has improved compared to before. It will improve further by January. Although there are no challenges in the dollar market at present, there are some challenges in paying overdue LC liabilities. Some banks are not paying LC liabilities on time. This is causing problems for other banks."
Quoting the Governor, she said, "No one should manipulate the dollar market. No bank should hold dollars to sell at higher prices. Again, do not try to benefit by transferring to cross currencies. Administrative measures will be taken against banks that delay the payment of LC liabilities in the future. They will not be allowed to open LCs."
The spokesperson said, "Banks have a lot of expenses behind credit cards. The interest rate is very low accordingly. So, the banks have requested the Governor to increase the interest rate. Apart from that, they have asked to change the write-off policy. They want to be able to file lawsuits immediately after two years of write-off. However, the Governor did not make any final decision on this matter. He said that a decision would be taken after discussing with the department."
An MD of a private bank, who did not want to be named, said, "Quite a few issues have been discussed. Among them, it has been reported that the dollar market has improved. Again, some of the weak banks that are suffering from a liquidity crisis have improved. But many banks are still in crisis. The Governor has asked those who have liquidity to come forward to provide liquidity support to those banks that are still facing a liquidity crisis."
He said that the situation of some banks has improved due to the steps taken by the Bangladesh Bank. Customers have also regained confidence. Those who are still in crisis will be able to recover if they get help.
After the fall of Sheikh Hasina's government in the student-people's uprising on August 5, the Bangladesh Bank reconstituted the boards of directors of banks that were plagued by irregularities and corruption. From August 20 to date, the regulatory body has changed the boards of 11 banks. Among them, the S Alam Group controlled eight banks. These are - Islami Bank Bangladesh, First Security Islami Bank, Al-Arafah Islami Bank, Social Islami Bank, Global Islami Bank and Union Bank. In addition, they took control of Bangladesh Commerce Bank and National Bank. These banks are suffering from a liquidity crisis. However, the situation of 6 of these banks has reached such a stage that they do not have enough cash to transact in many of their branches, and transactions have almost stopped. Bank officials, including branch managers, are facing unpleasant situations every day under pressure from depositors.
In such a situation, the central bank is arranging liquidity from good banks for weak banks through the interbank market. In this case, the Bangladesh Bank is guaranteeing for the weak banks. In the last one and a half months, weak banks have been provided with liquidity support of 5,585 crore taka.
The guarantee of the Bangladesh Bank is that if any bank fails to repay the loan for any reason, the central bank will pay that money. For the time being, the central bank is not giving money directly but is arranging loans from other banks. In other words, money from the market will go from one bank to another. As a result, there will be no additional pressure on inflation.
Meanwhile, seven banks in crisis have sought liquidity support of around 29 billion taka to recover. Among them, Islami Bank has sought 5 billion taka, First Security Islami Bank 7.9 billion taka, Social Islami Bank 2 billion taka, Union Bank 1.5 billion taka, Global Islami Bank 3.5 billion taka, National Bank 5 billion taka and Exim Bank 4 billion taka.
Apart from the 8 of S Alam, the other three banks whose boards have been reconstituted are IFIC, UCB and Exim Bank.
Among them, IFIC Bank was under the control of Salman F Rahman, the former private industry and investment advisor to Prime Minister Sheikh Hasina, United Commercial Bank was under the control of former Land Minister Saifuddin Chowdhury and his family, and Exim Bank was under the control of influential businessman and former chairman of the Bangladesh Association of Banks (BAB), Nazrul Islam Majumdar.
