Siddique Islam
Leaders of Bangladesh Association of Banks (BAB) requested the central bank governor Tuesday to re-fix credit-deposit ratio (CDR) by allowing six more months to implement the revised CDR.
The BAB proposed increasing CDR by 5.0 percentage points from the existing 85 per cent to 90 per cent for conventional commercial banks, while allowing Sharia-based Islamic banks to maintain 95 per cent against the existing 90 per cent.
The apex forum of the country's private commercial banks (PCBs) made the proposal at a meeting with the high-ups of Bangladesh Bank (BB) held at its conference room Tuesday.
BB governor Atiur Rahman presided over the meeting, while a 25-member delegation of the BAB led by its chairman Nazrul Islam Mazumder participated in it.
At the meeting, the central bank did not give any specific assurance to the BAB leaders in this connection. But the BB said that it would consider the CDR issue 'softly' for those commercial banks which have loan-able funds.
On February 20 last, the central bank had set June 30 as deadline for bringing down the CDR of the commercial banks to a reasonable level.
Under the directives, 19 conventional commercial banks will have to bring down their CDR to 85 per cent, while five Sharia-based Islamic banks to 90 per cent by June 30.
"We've sought six more months from the central bank to implement the BB directive regarding the CDR," the BAB chairman told reporters, adding that prices of commodities, including cotton, have increased as a result of which banks cannot maintain the existing CDR level.
The BAB wants to bring down the proposed CDR limit by December 31 instead of June 30, he added.
Regarding liquidity situation, the BAB chief said the banks are now offering interest rates on deposit maximum at 14 per cent that indicates liquidity crunch in the banking system.
"We've proposed to the central bank to increase the CDR limit for easing liquidity crunch in the market," Mr. Mazumder said, adding that the country's real investment is being hampered due to the liquidity shortfall.
The BAB also urged the BB to impose a cap on the interest rates on deposits for minimising the overall cost of funds of the commercial banks. But the BB ruled out the proposal, saying that it will not possible at this moment.
"We've already withdrawn the lending rate cap in all sectors barring two -- agriculture and industrial term loan -- to facilitate the country's overall economic growth. As a result, the central bank does not want to impose any deposit cap for now," Executive Director of the BB Jahangir Alam told the FE.
He also said the central bank will consider the CDR issue compassionately for those commercial banks that has loan-able funds which could be invested in the productive sectors.
The central bank also ruled out slashing of policy interest rates and statutory liquidity ratio (SLR) and cash reserve requirement (CRR), saying that it would not be possible in the near future as steps are on to curb inflationary pressure on the economy.
http://www.fe-bd.com/more.php?news_id=138498&date=2011-06-08
Leaders of Bangladesh Association of Banks (BAB) requested the central bank governor Tuesday to re-fix credit-deposit ratio (CDR) by allowing six more months to implement the revised CDR.
The BAB proposed increasing CDR by 5.0 percentage points from the existing 85 per cent to 90 per cent for conventional commercial banks, while allowing Sharia-based Islamic banks to maintain 95 per cent against the existing 90 per cent.
The apex forum of the country's private commercial banks (PCBs) made the proposal at a meeting with the high-ups of Bangladesh Bank (BB) held at its conference room Tuesday.
BB governor Atiur Rahman presided over the meeting, while a 25-member delegation of the BAB led by its chairman Nazrul Islam Mazumder participated in it.
At the meeting, the central bank did not give any specific assurance to the BAB leaders in this connection. But the BB said that it would consider the CDR issue 'softly' for those commercial banks which have loan-able funds.
On February 20 last, the central bank had set June 30 as deadline for bringing down the CDR of the commercial banks to a reasonable level.
Under the directives, 19 conventional commercial banks will have to bring down their CDR to 85 per cent, while five Sharia-based Islamic banks to 90 per cent by June 30.
"We've sought six more months from the central bank to implement the BB directive regarding the CDR," the BAB chairman told reporters, adding that prices of commodities, including cotton, have increased as a result of which banks cannot maintain the existing CDR level.
The BAB wants to bring down the proposed CDR limit by December 31 instead of June 30, he added.
Regarding liquidity situation, the BAB chief said the banks are now offering interest rates on deposit maximum at 14 per cent that indicates liquidity crunch in the banking system.
"We've proposed to the central bank to increase the CDR limit for easing liquidity crunch in the market," Mr. Mazumder said, adding that the country's real investment is being hampered due to the liquidity shortfall.
The BAB also urged the BB to impose a cap on the interest rates on deposits for minimising the overall cost of funds of the commercial banks. But the BB ruled out the proposal, saying that it will not possible at this moment.
"We've already withdrawn the lending rate cap in all sectors barring two -- agriculture and industrial term loan -- to facilitate the country's overall economic growth. As a result, the central bank does not want to impose any deposit cap for now," Executive Director of the BB Jahangir Alam told the FE.
He also said the central bank will consider the CDR issue compassionately for those commercial banks that has loan-able funds which could be invested in the productive sectors.
The central bank also ruled out slashing of policy interest rates and statutory liquidity ratio (SLR) and cash reserve requirement (CRR), saying that it would not be possible in the near future as steps are on to curb inflationary pressure on the economy.
http://www.fe-bd.com/more.php?news_id=138498&date=2011-06-08
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