Banks will have to face punitive action if they fail to maintain the advance-deposit ratio prescribed by Bangladesh Bank (BB), the apex bank governor, Dr Atiur Rahman, said on Wednesday. According to a BB directive, the ceiling for advance-deposit ratio is 85 per cent for conventional banking, and 90 per cent for the Islami Shariah banking. Banks must maintain the statutory liquidity ratio (SLR) at 19 per cent in case of conventional banking and 11.5 per cent for Islami Shariah banking, which allow credit disbursement up to 81 per cent and 88.5 per cent respectively.
“Banks with advance-deposit ratios above 85 per cent must fall in line, by June, by raising deposits and scaling down lending commitments, or else they won’t be allowed to open new branches and expand business, Rahman said, at a meeting with bankers at the central bank office. They will also face downgrading of their Camels rating and the usual penal action as per the Bank Companies Act," he added.
The governor, during a meeting with bankers in the capital, told them to cut lending for non-essential and unproductive purposes. However, there are some complaints about loans being refused summarily for ongoing productive activities and for essential imports, he pointed out.
Rahman also expressed disappointment over the inefficiency of banks to collect export payments timely, which is resulting in difficulty in payment for imports. He said export receipts are lagging behind export shipments by nearly US $2 billion.
The governor urged the bank CEOs to pep up their export desks so that they could timely collect export bills from abroad in order to meet import bill payments.
"There is much that banks themselves can and should do to improve market liquidity further by hastening repatriation of proceeds of booming exports of their clients," he said.
Hastening collection of even a fraction of the huge amount ($2 billion) will ease market liquidity considerably in terms of both taka and forex. And this would, in turn, ease pressures on taka exchange rates and interest rates, he added.
Rahman said he would welcome a proposal jointly by two key players in the banking sector, Bangladesh Association of Banks (BAB) and Association of Bankers Bangladesh (ABB), for a revision of the decade-old BB guidelines on minimum required standards of management of core risks.
"With a view to eliciting stronger engagement and ownership of actual users of the guidelines in the banking community, we would like to see ABB and BAB jointly take the initiative in this ragard," he said.
BB staff in the regulation and supervision departments will extend necessary support in this regard. BB deputy governors Nazrul Islam and Murshid Kuli Khan, and managing directors of Janata Bank, City Bank and Pubali Bank, SM Aminur Rahman, K Mahmood Sattar and Helal Ahmed Chowdhury, respectively, joined the meeting, among others.

News: The Independent/ Bangladesh/ May-12-2011