FE Report (March 15, 2011)
Credit-deposit ratio (CDR) of the commercial banks has started declining, following a special monitoring by the central bank, officials said Monday.
Twenty four private commercial banks (PCBs), out of a total of 30, have come under such monitoring of the Bangladesh Bank (BB), aimed at bringing down their CDR to a safe limit by June 30 this year.
Average CDR of all banks came down to 85.40 per cent on February 24 last from 86.05 per cent on February 10, according to the central bank's latest statistics, released Monday.
"We're now monitoring the CDR position of the banks on a weekly basis, in line with their action plans, submitted earlier to the central bank," a BB senior official told the FE.
He also said all 24 PCBs were earlier asked to submit their action plans in this connection, without hampering their credit flow to the priority sectors, including agriculture and small and medium enterprises (SMEs).
On February 20 last, the central bank of Bangladesh set June 30 as the deadline to bring down the CDR of the commercial banks to an acceptable 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 next.
Most PCBs are now discouraging credit to 'non-essential imports' aiming to bringing down their CDR to a rational level with the stipulated timeframe.
"We're now financing in the priority sectors in accordance with the advice of the central bank," an executive officer of a leading PCB told the FE, adding that the PCBs are providing loans for importing food grains and capital machinery.
"The banks are now providing loans on a selective basis, considering their respective assets and liabilities position," the executive said without elaborating.
The central bank wants the banks to keep their credit growth in line with their deposit growth, after strictly following the existing assets and liabilities management guidelines, another BB official said.
Credit growth of all 47 scheduled banks stood at 29 per cent as on February 3 while deposit growth, at 22 per cent, the BB data showed.
The credit-deposit ratio (CDR) limit of Bangladesh Bank (BB) is now set at 85 per cent for conventional banks and 90 per cent, for Islami banks.
The state of affairs relating to CDR of banks, as prepared by BB based on the figures as on December 31, 2010 showed that the average CDR of all 47 banks was at 85.04 per cent.
Out of 27 non-compliant banks as far as the CDR is concerned, 21 were private commercial banks (PCBs) including four Islami banks, two foreign banks and the rest four, belonged to the category of specialised banks on December 31, 2010.
The CDR of each of the four state-owned commercial banks was, however, much lower than the ceiling of the central bank, showed the BB figure.
According to the BB data as on December 31, 2010, the CDR of Sonali Bank was 65.98 per cent, Agrani 81.45, Janata 80.11 and Rupali Bank 69.31 per cent as on December 31 last.
The 21 PCBs in question, on the basis of the BB statistics on December 31, 2010, were Pubali Bank Ltd with CDR at 90%, AB Bank 93.52%, National Bank 88.72%, Islami Bank Bangladesh 94.62%, ICB Islamic Bank 119.70%, Eastern Bank 90.75%, NCCBL 89.88%, Prime Bank 89.69%, Southeast Bank 87.65%, Dhaka Bank 93.53%, Al Arafa Islami Bank 91.65%, Social Islami Bank 91.98%, Mercantile Bank 89.66%, Standard Bank 92.74%, Exim Bank 103.86%, First Security Bank 93.67%, Premier Bank 85.24%, Bank Asia 90.50%, Shahjalal Bank 96.34%, Jamuna Bank 87.52% and the CDR of BRAC Bank was 90.84% as on December 31, 2010.
Two foreign banks that crossed the set ratio then were State Bank of India at 109.72% and National Bank of Pakistan at 118.68%, according to the statistics of BB.
The CDR of Bangladesh Krishi Bank at the close of December last was at 103.63%, Rajshahi Krishi Unnayan Bank, 225.40%, BASIC Bank, 91.14% and Bangladesh Development Bank, 203.86%.
A top official in the BB said if any bank fails to bring down the ratio by the deadline, punitive action will be taken against the bank including non-issuance of new licence to open their new branches.
He said the banks went into risky areas to make high profits overnight. Recently, the banks made most of such investments in the stock market to make quick returns on investment.
Another BB official said in the backdrop of skyrocketing real estate prices, banks have been asked not to extend loans for purchase of landed property. Compliance surveillance relating to the ceiling about holding of capital market assets by banks was tightened in June 2010, he added.
Meanwhile, in the backdrop of tightening the CDR, the commercial banks have been driving aggressively to collect deposits at higher rates, bankers said.
Some banks are even offering rate of interest at 14-15 per cent against deposits, they said.
"The branch managers of PCBs have been given enhanced target to collect deposits, while other members of the staff of banks are being asked by their respective managers to collect deposits even at high costs," a managing director of a PCB told FE.
"This is the direct consequence of the latest directive of BB in adjusting CDR," he added.
A section of the worst-affected investors in the share market following recent volatility and fall in share prices are the major depositors with banks now, a branch manager of a PCB said.
Twenty four private commercial banks (PCBs), out of a total of 30, have come under such monitoring of the Bangladesh Bank (BB), aimed at bringing down their CDR to a safe limit by June 30 this year.
Average CDR of all banks came down to 85.40 per cent on February 24 last from 86.05 per cent on February 10, according to the central bank's latest statistics, released Monday.
"We're now monitoring the CDR position of the banks on a weekly basis, in line with their action plans, submitted earlier to the central bank," a BB senior official told the FE.
He also said all 24 PCBs were earlier asked to submit their action plans in this connection, without hampering their credit flow to the priority sectors, including agriculture and small and medium enterprises (SMEs).
On February 20 last, the central bank of Bangladesh set June 30 as the deadline to bring down the CDR of the commercial banks to an acceptable 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 next.
Most PCBs are now discouraging credit to 'non-essential imports' aiming to bringing down their CDR to a rational level with the stipulated timeframe.
"We're now financing in the priority sectors in accordance with the advice of the central bank," an executive officer of a leading PCB told the FE, adding that the PCBs are providing loans for importing food grains and capital machinery.
"The banks are now providing loans on a selective basis, considering their respective assets and liabilities position," the executive said without elaborating.
The central bank wants the banks to keep their credit growth in line with their deposit growth, after strictly following the existing assets and liabilities management guidelines, another BB official said.
Credit growth of all 47 scheduled banks stood at 29 per cent as on February 3 while deposit growth, at 22 per cent, the BB data showed.
The credit-deposit ratio (CDR) limit of Bangladesh Bank (BB) is now set at 85 per cent for conventional banks and 90 per cent, for Islami banks.
The state of affairs relating to CDR of banks, as prepared by BB based on the figures as on December 31, 2010 showed that the average CDR of all 47 banks was at 85.04 per cent.
Out of 27 non-compliant banks as far as the CDR is concerned, 21 were private commercial banks (PCBs) including four Islami banks, two foreign banks and the rest four, belonged to the category of specialised banks on December 31, 2010.
The CDR of each of the four state-owned commercial banks was, however, much lower than the ceiling of the central bank, showed the BB figure.
According to the BB data as on December 31, 2010, the CDR of Sonali Bank was 65.98 per cent, Agrani 81.45, Janata 80.11 and Rupali Bank 69.31 per cent as on December 31 last.
The 21 PCBs in question, on the basis of the BB statistics on December 31, 2010, were Pubali Bank Ltd with CDR at 90%, AB Bank 93.52%, National Bank 88.72%, Islami Bank Bangladesh 94.62%, ICB Islamic Bank 119.70%, Eastern Bank 90.75%, NCCBL 89.88%, Prime Bank 89.69%, Southeast Bank 87.65%, Dhaka Bank 93.53%, Al Arafa Islami Bank 91.65%, Social Islami Bank 91.98%, Mercantile Bank 89.66%, Standard Bank 92.74%, Exim Bank 103.86%, First Security Bank 93.67%, Premier Bank 85.24%, Bank Asia 90.50%, Shahjalal Bank 96.34%, Jamuna Bank 87.52% and the CDR of BRAC Bank was 90.84% as on December 31, 2010.
Two foreign banks that crossed the set ratio then were State Bank of India at 109.72% and National Bank of Pakistan at 118.68%, according to the statistics of BB.
The CDR of Bangladesh Krishi Bank at the close of December last was at 103.63%, Rajshahi Krishi Unnayan Bank, 225.40%, BASIC Bank, 91.14% and Bangladesh Development Bank, 203.86%.
A top official in the BB said if any bank fails to bring down the ratio by the deadline, punitive action will be taken against the bank including non-issuance of new licence to open their new branches.
He said the banks went into risky areas to make high profits overnight. Recently, the banks made most of such investments in the stock market to make quick returns on investment.
Another BB official said in the backdrop of skyrocketing real estate prices, banks have been asked not to extend loans for purchase of landed property. Compliance surveillance relating to the ceiling about holding of capital market assets by banks was tightened in June 2010, he added.
Meanwhile, in the backdrop of tightening the CDR, the commercial banks have been driving aggressively to collect deposits at higher rates, bankers said.
Some banks are even offering rate of interest at 14-15 per cent against deposits, they said.
"The branch managers of PCBs have been given enhanced target to collect deposits, while other members of the staff of banks are being asked by their respective managers to collect deposits even at high costs," a managing director of a PCB told FE.
"This is the direct consequence of the latest directive of BB in adjusting CDR," he added.
A section of the worst-affected investors in the share market following recent volatility and fall in share prices are the major depositors with banks now, a branch manager of a PCB said.
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