Banks to seek help fulfil gigantic stimulus package
Banks have decided to call upon the central bank to take more policy measures to allow them to implement the lion's share of the government's Tk 72,500 crore bailout package successfully amid business collapse, tight liquidity situation and higher defaulted loans.
The Association of Bankers, Bangladesh (ABB), a forum of bank managing directors, took your choice yesterday at a gathering.
The association would write a letter to the Bangladesh Bank by tomorrow to request it to cut the statutory liquidity ratio (SLR), the cash reserve ratio (CRR) and the policy rates further, said the managing directors of three banks who attended the meeting but requested anonymity because of sensitivity of the matter.
Of the rescue package, banks will have to provide Tk 50,000 crore in loans from their own resources to small, medium and large businesses.
But most the banks have been hit hard by the liquidity crunch as a great number of individual and corporate clients are withdrawing funds frequently due to the ongoing financial fallout from the pandemic.
"All types of businesses of banks attended to a halt. But we need to implement the financial packages using our own funds. So, we are in need of more policy support," said one MD.
On March 23, the BB made funds cheaper for banks by reducing the policy, or repurchase agreement rate (Repo), by 25 basis points to 5.75 per cent.
It slice the CRR by 50 basis points to 5 %, injecting about Tk 6,400 crore into the economy.
But the policy measures are not sufficient given the gravity of the ongoing situation, the MD said.
The ABB would request the BB to cut the SLR by 2 percentage points to 11 per cent and the CRR by 75 basis points to 4.25 %.
If both are slashed, it could free up more than Tk 3,000 crore.
The ABB may also urge the BB to consider the reduced amount of policy rate to the utmost level.
Lenders are also in confusion over the conditions and conditions of the Tk 5,000 crore bailout package for exporters, the MD said.
A great deal of provisioning will be needed if some of the funds becomes defaults, that will create a problem for lenders later on.
So, the ABB would seek a clarification from the BB on whether they will need to keep provisioning against the defaulted loans.
The banking sector, which has already been fighting heaving soured loans, will face a good amount of defaulted loans in the times ahead as the capacity of several clients to pay back credits is eroding.
Defaulted loans totalled Tk 94,313 crore towards the end of 2019, up 0.42 per cent year-on-year, according to data from the BB.
Both government and the BB would have to monitor the implementation of the bailout package strictly or else the habitual defaulters with strong political links would siphon off money from the programme.
"If the habitual defaulters can't be kept in balance, the banking sector and the whole economy will face a extreme crisis," said the 3rd MD.
