18 banks face acute liquidity crisis

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Saturday, 28 January 2012

Author / Source : MD MONIRUL ALAM

DHAKA, JAN 27: Two state-owned, 14 private and two foreign banks are in such an acute liquidity crisis that they are driven to borrow from the call money market almost every working day to meet their clients' demand for cash. Among the non-bank financial institutions (FIs), eight are reeling under the liquidity crisis, while 15 others are lending to the call money market regularly, meaning that the latter's status of liquidity is relatively better.
Bangladesh Bank governor Dr Atiur Rahman, while announcing the monetary policy for the second half of the current financial year, on Thursday, said that the important role of the central bank was to protect banks from being affected by liquidity crisis.
"High borrowing by the government from the banking system in recent months has triggered pressure on liquidity, but the central bank injected cash into banks through using Repo (one of two vital instruments to control money supply) to help banks avoid deterioration in liquidity status," he added.

An official of the central bank, seeking anonymity, said that the liquidity status reached such a proportion that some banks had become desperate in getting cash, driving the call money rate to rise.
“To check abnormal rise in call money rate, the central bank is executing a cap, 20 per cent for banks and 22 per cent for the FIs. And, most of the transaction is being processed within the cap,” he added.
According to BB data from January 1 to January 23, state-owned Agrani Bank Limited topped the list of banks gone for overnight borrowing from the call money market. On average, this bank has borrowed over Tk. 300 crore every working day. Another state-owned bank, Sonali Bank Limited, remains in the next position as it borrowed about Tk. 250 crore daily. Within this period, the aggregated amount of borrowing by these two banks are Tk. 5,054 crore (Agrani) and Tk. 4,217 crore (Sonali).
However, two other state-owned banks — Janata Bank Ltd and Rupali Bank Ltd — have lent to the call money market on a regular basis. Within this period, Janata Bank lent Tk. 15,334 crore while Rupali Bank lent Tk. 1,698 crore.
Among private banks, big lenders were Basic Bank Ltd (lending amount Tk. 11,894 crore), United Commercial Bank Ltd (Tk. 8,769 crore), Pubali Bank Ltd (Tk. 6,825 crore),  Dutch Bangla Bank Ltd (Tk. 5,434 crore), The Trust Bank Ltd, Bank Al-Falah, Premier Bank Ltd, One Bank Ltd and Bangladesh Development Bank.
Two foreign banks that went for regular borrowing from the call money market are Bank Asia Limited and National Bank of Pakistan.
Among foreign banks, Commercial Bank of Ceylon, Citibank NA, Habib Bank Limited, Honkong Shanghai Banking Corporation, Standard Chartered Bank, State Bank of India and Woori Bank have lent to the call money market.
Borrowing and lending are almost parallel for The City Bank Ltd (aggregated lending Tk. 2,391 crore and borrowing Tk. 2,955 crore) and Standard Bank Ltd (borrowing Tk. 1,060.50 crore and lending Tk. 1,133 crore).
Meanwhile, FIs, such as, International Leasing, Lanka Bangla, Peoples Leasing, Prime Finance, Union Capital, Reliance Finance Ltd, ICB Islamic Bank Ltd and BIFC, are facing acute liquidity crisis.
However, other FIs like BAY Leasing, Delta Brac Housing, Far East Finance, IDLC BD Ltd, IIDFC, IPDC, National Housing, Uttara Finance, MIDAS, GSP Finance, Premier Leasing, United Leasing, IDCOL(Infrastructure Dev. Co.) and Grameen Bank, have regularly lent money to the call money market. Such financial institutions enjoy liquidity status slightly better than the others.