Extra liquidity falls after 8 months
The surplus liquidity within the banking sector, which has exploded because of the pandemic-induced drop in demand for credit score and an injection of funds as a part of an enormous stimulus bundle, fell in January, the primary time in eight months.
The surplus liquidity stood at Tk 204,070 crore in January, in comparison with Tk 204,700 crore a month in the past.
The excess fund, nevertheless, jumped 97% in January from the identical month a yr in the past, when the quantity stood at Tk 103,358 crore.
The Each day Star spoke to 4 managing administrators of banks and the CEO of a non-bank monetary establishment to seek out out why extra liquidity had shrunk.
A few of them argued that the investments had not but been reinstated. And depositors had prevented banks due to a decrease rate of interest on deposit merchandise.
The opposite MDs imagine that the demand for credit score has elevated barely, which has had a optimistic impression on the liquidity scenario within the banking sector.
Between June and December of final yr, the excess fund elevated from Tk 10,000 crore to Tk 12,000 crore per 30 days on common.
Regardless of January’s decline, non-public sector credit score development fell to eight.32 p.c within the first month of 2021, from 8.37 p.c a month earlier, mentioned Syed Mahbubur Rahman, chief govt of Mutual Belief Financial institution.
“This confirmed that demand for personal sector funding continues to be low,” he mentioned.
Nearly all of lenders now supply an rate of interest of 3-4% on mounted deposit techniques, which bothers depositors. Inflation was 5.02% in January, which suggests the true rate of interest is detrimental.
“Such a phenomenon can create an asset bubble in an economic system,” mentioned Rahman.
Individuals at the moment are exploring different methods to take a position, such because the capital market, land, and financial savings certificates, to earn larger returns than depositing cash in banks.
“It helped cut back extra liquidity in January,” Rahman mentioned.
Faruq Mainuddin, a former chief govt of Belief Financial institution, mentioned demand for credit score confirmed no indicators of enhancing.
Some banks disbursed funds in January that had been sanctioned earlier to maintain the availability down towards the disbursed fund, he mentioned.
Selim RF Hussain, managing director of Brac Financial institution, mentioned demand for enterprise credit score had elevated barely, however the pattern had not but reached a passable stage.
Many corporations are nonetheless adopting a slowdown coverage to develop their companies as a result of they imagine there shall be uncertainties within the days to come back, he mentioned.
Many garment factories are struggling to outlive like most nations in North America, and Europe nonetheless faces financial hardships.
Abul Kashem Md Shirin, managing director of Dutch-Bangla Financial institution Ltd, mentioned his financial institution noticed elevated demand for credit score in January.
“However there is no such thing as a room to be complacent as a result of the pattern in credit score demand continues to be inadequate given the dimensions of the economic system,” he mentioned.
Arif Khan, Managing Director of IDLC Finance, known as the decline in extra liquidity a optimistic indication.
He went on to specific the hope that the excess fund would lower to a big extent in June of this yr.
The federal government and the central financial institution have rolled out numerous stimulus packages as a part of their efforts to deal with the financial disaster stemming from the pandemic.
The full quantity of economic help now stands at Tk 124,053 crore, or 4.44 p.c of GDP.
This has contributed to the expansion of extra liquidity at a time when the demand for credit score has declined sharply.