CRR, SLR shortfalls still plague eight banks

Eight private commercial banks, including six sharia-based ones, have been facing Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) shortfalls in recent months mainly due to the severe liquidity crisis.

These banks are – Islami Bank Bangladesh, Social Islami Bank, Union Bank, Global Islami Bank, First Security Islami Bank, Bangladesh Commerce Bank, National Bank and ICB Islamic Bank. They are facing either CRR or SLR shortfall, signifying a deep crisis.

The CRR determines the portion of customer deposits that banks must keep as a reserve with the central bank, while the SLR is a minimum percentage of deposits that banks have to maintain in the form of cash, gold or other securities.

Both traditional and Islamic banks have to maintain 4 per cent of cash as CRR. Traditional banks have to maintain 13 per cent of cash equivalent assets as SLR, while Islamic banks have to maintain only 5.5 per cent SLR, as per the central bank rules.

From the last month till this Sunday, the Bangladesh Bank had imposed a Tk 25 crore fine on these eight banks, said a senior official of the central bank seeking anonymity, adding that the eight lenders jointly faced the highest Tk 10,000 crore as CRR and SLR shortfalls in a single day.

Commenting on the eight banks, while unveiling the new monetary policy on Sunday, central bank Governor Abdur Rouf Talukder said, “We continuously met with those banks about the issue, and we gave them a deadline till September this year to improve their current situation.

“We imposed fines to the eight banks due to their CRR and SLR shortfall, but imposing fines is not our priority. We want to improve the financial health of such banks.”

Industry insiders said those banks are facing CRR and SLR shortfall due to their liquidity shortage created by a huge deposit withdrawal pressure in recent months. These lenders continue to take liquidity support from the central bank to cover the shortage.

Islami Bank Bangladesh, the largest private bank in the country, now faces severe liquidity shortage due to huge deposit withdrawal pressure in the recent period, after the bank’s loans irregularities came under media spotlight.

This bank already took a large amount of emergency liquidity support – Tk 8,000 crore – from the banking regulator on December 29 last year.

The Business Post correspondent tried to reach Islami Bank Managing Director and CEO Mohammed Monirul Moula over phone, but he could not be reached till the filling of the report.

However, a senior official of the central bank said, “When Islami bank faced a liquidity crisis, it impacted the other sharia-based banks as well because this bank is the largest lender for other sharia-based banks.

“As a result, apart from Islami Bank, Social Islami Bank, Union Bank, Global Islami Bank, and First Security Islami Bank are now facing CRR shortfall as well.”

Speaking to The Business Post, Social Islami Bank Managing Director and CEO Zafar Alam said, “We had faced a challenging period several months ago.

As a result, we fail to maintain the CRR and SLR sometimes.

“We will overcome this situation in the coming months, as our loans recovery from borrowers is better than the previous days.”

Of the eight banks, six are controlled by a Chittagong-based business group.

Bangladesh Commerce Bank, National Bank and ICB Islamic Bank, whose financial conditions are worsening day by day due to loans irregularities and scam, faces CRR and SLR shortfall.

National Bank was one of the reputed banks in the country only a few years ago, but now its financial condition has worsened. The bank incurred a big loss of Tk 3,260 crore in 2022, as per its financial data.

The bank’s Managing Director and CEO Md Mehmood Husain said, “Last year, the bank faced some deposit withdrawal pressure due to the adverse reporting by the media. After that, some rumours in the social media impacted the depositors’ trust

“The bank has failed to control the deposit withdrawal pressure. We have no problem in maintaining CRR, but we are failing to maintain SLR with the central bank. The forex crises and slow recovery from borrowers had negatively impacted the bank’s liquidity as well.”

The bank faced around Tk17 crore as fine by the central bank due to the shortfall of SLR from last year till date.

AB Mirza Azizul Islam, former adviser to the caretaker government, said, “When banks’ defaulted loans increase, it impacts that bank’s liquidity. It is an indication of distrust of banks and the depositor’s money is at risk.

“The government and the central bank will have to take strict action against those involved in loan fraud and irregularities.”