The country’s banking sector to a large extent got back from funds crisis as the central bank though repurchase agreement (repo) is infusing sufficient currency in the money market everyday.

The money infusion will be five times higher than money it withdrawn through increasing the cash reserve ratio (CRR) of the banks, a senior officials of Bangladesh Bank told BSS.

He said stabilisation of money market helps the banking sector giving some positive indications in terms of reduction of the loan- deposit-ratio and call money interest rate at the end of the third quarter of the current fiscal.

Despite some banks are still reeling on that difficulty, he said the banks can cope with the situation by using the foreign currency reserve, as its reserve also increased moderately in recent times.

Responding to the media reports on the fund crisis, the BB official said ‘It’s not true that the enhancement of the CRR caused the capital crisis. “The central bank withdrew around Taka 20 billion from the money market through CRR. But, at present everyday we are infusing money five times higher than the withdrawn money,” he said.

The additional reserve of the schedule banks also remained normal, he said adding that the amount of the additional reserve stood at Taka 17 billion in February.

He said the high demand of Repo to banks is now decreasing and it proves that liquidity crisis is now declining.

Referring anonymity, the official said the liquidity crisis was basically resulted from inefficiency in fund management, having no reserve for crisis period, and lack of performance in management of liability over assets.

The official also discarded the report that Bangladesh is now suffering from imbalance in foreign currency transaction. He said in the first eight months (July-February) of the current fiscal country’s total import was to the tune of around US$ 22 billion.

At the same time country’s total export was of US$ 14 bullion and the remittance flow in the country was US$ 7.5 billion. So, total shortage of foreign exchange transaction was about US$ five billion. Moreover, he said the central bank gives one billion dollar overdraft support to the commercial banks.

In the above circumstances, the official said, Bangladesh Bank can easily manage the shortage of foreign currency transaction from its own reserve.

Talking to BSS on the issue, former BB governor Dr Faras Uddin said, illegal business of the commercial banks in the capital market was mainly responsible for the liquidity crisis.

“I perceive that the crisis is now over”, he said adding foreign exchange reserve is now in a very good condition and export and remittance are on rise as well.

So, the central bank can easily deal with any shortage of foreign exchange at this stage, he observed.

Another former central bank governor Dr Salehuddin Ahmed also observed that the overall liquidity crisis both of local and foreign currency is not in dire situation.

News: Daily Sun/ Bangladesh/ Mar-19-2011