The New Nation - Internet Edition

UNB, Dhaka

The liquidity position in the banking system has improved to some extent recently, rising from a state of concern only a month before.

Bangladesh Association of Banks (BAB), a platform of bank directors, chairman Nazrul Islam Majumder spoke of the liquidity position Wednesday, a month after the bankers created a hullabaloo due to liquidity crisis and sought intervention from Bangladesh Bank, the country's central bank.

"The liquidity crisis has reduced to a great extent with increased deposits. It is also reflected in the lower call money rate," he told reporters after a meeting with Governor Dr Salehuddin Ahmed at Bangladesh Bank. A BAB delegation, led by its chairman, met the Governor and senior executives of the central bank to discuss the overall banking sector issues including liquidity position, deposits, retirement of directors as per the Banking Companies Act and opening exchange houses abroad.

The bankers also demanded depositing of government funds with the private banks to help strengthen their liquidity position. "I've heard their proposals… we'll examine them," the Governor said. BAB chairman Majumder said the state-owned commercial banks share 75 percent of the government funds and the private banks only 25 percent, despite the private banks contribute 55 percent of the total banking sector contribution to the economy.

"The Governor has agreed, in principle, on the need for increasing deposit of the government funds to the private banks," he said, adding that the private banks were performing better than the state-owned banks. The loan recovery rate of the private banks are far better than that of nationalised banks.

Replying to a question, he said they sought the government funds even after the improvement of the liquidity position so they could offer lower lending rates to the borrowers.

Majumder said they requested the central bank to allow the private banks to open exchange houses abroad, particularly in the European countries. The Governor would consider the issue, he added.

About the move to raise paid up capital to Tk 400 crore, he said the central bank would allow the private banks to raise the capital in phases, possibly in 2-3 years.

About retirement of bank directors as per the Banking Companies Act, Majumder said there is a law in this regard. Even, they requested the central bank to relax the law through discussions with the banks for greater interest of the industry.

He requested the Governor to extend the tenure of the retiring directors after completion of six years in two terms by one more term.