The New Nation - Internet Edition

Bankers say the banks do not have enough lendable fund mainly because of government borrowing using the internal borrowing instruments. But on the demand side (from private investors) there exists high demand for credit. In such a situation if the banks go for lending further they will face acute liquidity crisis.

The government authorities (including Bangladesh Bank) say, ' no there is no liquidity crisis at macro level, may be certain Banks might have some fund hardship (or temporary crisis). And because of business-friendly fiscal package the demand for credit has gone high which the banks could not handle.

Anyway, transparent bank affairs statements are not available which makes real analysis of the figures difficult or near impossible.

Conventional wisdom suggest it is natural that as consequence of high scale borrowing by the government on its current account the banks will have surely smaller excess to lend in the private sector.

If the banks have to lend more they have to fetch more deposit(s) offering higher interests. That means it will increase the 'cost of capital' as the charged interest on loans/credits would be even higher. That will make investment more shy - the resultant net outcome will be a slowed down economy. That is not affordable or desirable. The government should stop its habit of running in red in Current Account allowing the banks the required breathing space and meet the credit needs of the businesses. That will be healthy for the economy and the nation.

Kalpana Chowdhury

Azimpur, Dhaka