Total liquid assets in the banking sector decreased by 2.63 per cent to Tk 4,10,170 crore at the end of November 2023 from Tk 4,21,233 crore at the end of June the same year.
The Bangladesh Bank published the data on liquid assets on Thursday.
On condition of anonymity, a senior official of the department concerned of the central bank said that liquid assets have declined in the banking sector mainly due to two key reasons.
Firstly, the banking sector is now facing USD crisis. As Bangladesh is an import-based country, there is always the demand for letter of credit (LC).
However, a bank earns USD from remittance and export proceeds through the banking channel. After the Covid-19 pandemic, the import demand has increased, so banks need more USD to open LCs. At that time, the country's banks faced a shortage of USD due to a decrease in remittance inflow.
Since that time, the central bank has been selling USD to scheduled banks to open LCs. Banks needed Tk 86 to purchase per USD from the central bank before 2020.
On the other hand, the central bank devalued taka by 28 per cent since 2022. So, banks need more taka to purchase per USD from the Bangladesh Bank.
In FY 23, the central bank sold around $14 billion to scheduled banks and the amount of taka against these dollars had gone to the regulator. As a result, liquid assets decreased in November 2023.
Secondly, the deposit growth was not as much as expected. Even though the deposit growth year-on-year was below 10 per cent for the consecutive 19th month from January 2022 to July 2023, several economists criticised the central bank’s policy.
According to the central bank latest data, liquid assets have decreased in all types of banks except for foreign banks.
Liquid assets of state-owned banks dropped to Tk 1,23,346 crore in November 2023 from Tk 1,33,929 crore in June 2023.
Again liquid assets of specialised banks stood at Tk 2,118 crore in November last year, which was Tk 2,540 crore in June the same year.
Besides, liquid assets of private banks stood at Tk 1,94,091 crore in November, which was Tk 1,96,662 crore in June while liquid assets of Islami banks fell to Tk 37,086 crore in November from Tk 37,933 crore in June.
In addition, liquid assets of foreign banks increased to Tk 53,527 crore in November 2023, which was Tk 50,168 crore in June the same year.
Talking to The Business Post, Ahsan H Mansur, Executive Director of Policy Research Institute of Bangladesh (PRI) said, “The deposit growth is very slow in the banking sector. So, liquid assets have decreased in banks. The deposit ratio should be better otherwise this sector would not recover from the crunch. The deposit growth should have more than 12 per cent in the banking sector.”
“The Bangladesh Bank is continuously selling USD from its forex reserves to scheduled banks to facilitate LCs. That’s why liquid assets dropped in the banking sector,” he added.
He also said, “The amount of money outside banks increased due to the national polls.”
Dr Zahid Hussain, former lead economist of the World Bank Dhaka office, told The Business Post, “Banks have to earn USD from their own efforts, and dependency on the central bank should be reduced.”
Mohammad Hatem, President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told The Business Post, “The rate per USD for opening LCs was Tk 86 before the coronavirus outbreak. Currently, importers need Tk 110 as per instructions of Bangladesh Foreign Exchange Dealers Association and Association of Bankers, Bangladesh.
“As a result, we need more taka for per USD. On the other hand, we can’t get sufficient USD for opening LCs due to a shortage of dollar.”
