The government has instructed the four state-owned commercial banks (SoCBs) including Sonali, Janata, Rupali and Agrani bank to invest their excess liquidity to the treasury bonds to reduce the ideal money from banking sector. The finance ministry also instructed the SoCBs to declare their excess liquidity to the finance ministry as well as the central bank. The finance ministry made the direction after a meeting with high officials of various banks especially the state-owned banks. The meeting was presided over by the additional secretary of Banking and Financial Institution Department of Finance Ministry, Gokul Chand Das.
Until November last the SoCBs' excess liquidity stood at Tk 343.94 billion against the entire banking sector's excess liquidity of Tk 901.66 billion.
Banking source said that banks could invest up to 81 per cent of their liquidity. Until November last the Sonali Bank invested 49 per cent, Janata Bank 63 per cent, Agrani Bank 63 per cent and Rupali Bank 61 per cent of their liquidity.
The central bank Executive Director M Mahfuzur Rahman told The Independent that the idle money of banking sector increased due to the political turmoil across the country over the last of months, especially before the last general elections. During the political unrest, a good number of banks failed to disburse their money on big project and large volume industrial loans.
Commenting on Sonali bank’ excess liquidity, he said that the bank is one the largest financial institution of the country. “If a significant portion of its fund remains idle, the bank will incur a heavy loss and employment generation will be affected”, said the executive director.
He expected that excess liquidity form banking sector would gradually decrease as the country’ political situation is now quite stable and banks are trying to fulfil their disbursement targets. The central bank also instructed banks to invest their money in productive sector to reduce excess liquidity, he also added.
Moreover, the government is going to reintroduce two-year treasury bonds to facilitate public borrowings and make the securities market vibrant. The government has set a target of borrowing Tk 7 billion through treasury bonds from the banking sector in the remaining period of the current fiscal year ending on June 30, he also said.
Another central bank official said the central bank still needs more information to have complete scenario of the banks’ health and is on move to collect more information about excess liquidity.
Obayet Ullah Al Masud, Deputy Managing Director of Rupali Bank said that his bank is not a member of Primary Dealer banks. Without membership of PD, bank can not invest their money in treasury bonds. The bank official demanded for the membership of PD banks for Rupali banks to invest their money in treasury bonds.
Meanwhile, the ministry directed the SoCBs to submit their investment proposal in different bonds within a week. The ministry also directed Rupali bank to take necessary steps for the membership of AD banks so that they can invest their money in the treasury bonds.
Banking source said that the rate of interest of the Treasury bond is low that is why a good number of banks are discouraging to invest in government bonds. Banks deposit rate is higher than the interest of government bonds, so it is very tough for banks to invest their deposited money into the government bonds, pointed Saiful Islam Patwary, manager of First Security Islami Bank, Dilkusha branch.
Talking to this correspondent, renowned economist, Professor Abu Ahmed pointed that there is no obligation to invest in treasury bonds which is fully depended on bank’s financial condition. He said that investment by force in government bonds is unethical. The economist urged the government to offer higher interest rate to the treasury bonds to encourage banks to invest more in the bonds.
Business people, however, expressed a different view. While talking to this correspondent Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) vice president Md Helal Uddin said that economy would face a huge challenge if the deposited money of the investors invested in the government bonds.
Private sector development would hamper if the excess liquidity is invested in treasury bonds, the business leader also pointed out.
He said that the business community is now availing the loan facilities at the rate of 20 per cent across the country. “It is very hard to establish the industry as well as operating the business by this hard term loan”, said the FBCCI vice-president. He demanded bank loans, with single digit interest, for entrepreneurs to have a smooth business.
The FBCCI vice president also pointed out that a good number of businessmen took the loan facility from foreign fund at the rate of 5 per cent which is more profitable for them. He suggested that banks have to allocate low interest loan to reduce the excess liquidity which, he said, would benefit the businessmen community as well as the economy.
At present various types of treasury bonds are available in the market having various durations. PD banks, financial institutions and insurance companies are the customers of treasury bonds. The care taker government banned the two-year period treasury bond. Bank officials,
however, suggested reintroduction of two-year bonds as it was to encourage short term investment.
According to banking sources, the government usually take bank loans by purchasing treasury bonds to meet its budget deficit. It is a long term investment.

News:The Independent/13-Mar-2014