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22 February, 2018 00:00 00 AM
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Central bank extends time to bring down ADR within new limit

STAFF Reporter

The Bangladesh Bang (BB) on Tuesday extended the time by six months for banks to bring down their respective advanced deposit

ratio (ADR) within the new limit declared on January 30.

“The banks will have to bring down ADR within the new limit by December 31, 2018 instead of the previous deadline of June 30,” said a BB circular in the capital.  

Earlier, BB slashed the advance-to-deposit ratio or ADR ceiling, which measures loans as a percentage of deposits for commercial banks, by 1.5 percentage points to 83.50 per cent.

The move is aimed at checking any possible liquidity pressure on the market due to "aggressive lending". For Shariah-based Islamic banks, it has been cut by 1 percentage point to 89 percent. The existing ratios for conventional and Islamic banks are 85 per cent and 90 per cent respectively.

The central bank said banks must gradually adjust to this new ceiling by June 30. It also instructed banks to design an action plan and submit it to BB's offsite supervision department by February 7. This move came against the backdrop of credit growth at a higher rate than that of deposits in recent months, discouraging depositors to put money in banks because of low interest rates.

The central bank said it planned to introduce “intensive and intrusive” supervision of credit flows. The revised limit of ADR will come into effect from June this year, according to a circular issued by BB. According to the new monetary policy statement, the recent surge in credit growth is moderating the ratio of the excess of SLR assets to the total demand and time liabilities (TDTL), often referred to as “excess liquidity”, reaching around 9 per cent in December 2017. The divergence between credit and deposit growth raised the average ADR from 73.90 per cent in FY17 to 75.9 per cent in December 2017, even though there was significant variation within the system.

At least 12 commercial banks, including the public ones, have already crossed the safe ADR limit, according to a recent confidential report of BB.

According the Monetary Policy Statement, in December 2017, broad money, domestic credit, and reserve money, the key aggregates of a monetary policy framework, grew by 10.7, 14.4 and 13.3 per cent respectively, remaining below or close to the programme targets.

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Editor : M. Shamsur Rahman

Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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