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Banks looking for loans, accumulating 'lazy money'

  • Financial
  • Lead News
  • 03 October, 2020 11:14:44

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News Desk: The hill of lazy money is growing day by day in the commercial banks. Banks are not getting people to take loans due to investment crisis. They are forced to go for alternative investments. And to encourage banks to invest in this alternative, the central bank has given concessions in capital savings.
 

 

In other words, to encourage venture capital and alternative investment, the central bank has given concessions to the bank to save capital. If you had invested 100 rupees in alternative investment for so long, you would have had to save 10 percent or 15 rupees capital by taking 150 rupees of risk. Now if you invest 100 rupees, you have to keep 10 percent or 10 rupees capital with 100 rupees of its risk.

On Tuesday (September 29), Bangladesh Bank issued a circular on 'Banking Regulation and Policy Division'.

Bangladesh Bank officials say the new decision by the central bank will reduce the pressure on banks to save capital in the sector and encourage alternative investment. Earlier, Bangladesh Bank issued a policy in 2014 on the adequacy of risk-based capital of banks. Under that policy, the rate of risk in investing in any sector is determined. It directed the imposition of 150 per cent risk against venture capital.
 

 


In a circular on Wednesday, it was said that in the interest of expanding the alternative investment sector in Bangladesh, the risk rate has been fixed at 100 per cent against investment in all sectors covered by alternative investment, including venture capital. This directive will remain in force till September 30, 2022.

This new alternative investment in Bangladesh has been divided into three parts. Venture capital, alternative investments or private equity and impact funds. The Bangladesh Securities and Exchange Commission (BSEC) published the Alternative Investment Act 2015 in June 2015.

According to the data of Bangladesh Bank, even though the tendency of deposits in banks has increased, they are not able to invest in that way. However, the interest rate on deposits has come down to below 6 percent. But ordinary people are keeping money in the banks in the hope of making sure profit and safe return. Besides, the inflow of foreign exchange has also increased during this period. Bangladesh Bank has bought this foreign currency from the bank. As a result, the same amount of cash in foreign currency has come into the hands of the bank. As a result, the amount of excess liquidity with the banks is increasing day by day.

Bank officials say the lack of new investments has increased liquidity in the bank's hands. In addition, the rise in remittances sent by expatriates during the epidemic and the acceleration in deposit growth have also helped increase liquidity. Apart from this, reduction in cash deposit rate (CRR) has increased liquidity in the hands of banks. But on the contrary, the distribution of loans to the private sector has not increased. Even the government has reduced borrowing than before. In addition, the amount of income against treasury bill-bonds has also decreased.

The biggest thing is that in the current situation, the banks are being careful in disbursing loans. That is why the amount of liquidity has increased to a record amount during the Corona period.

In this context, the Executive Director of the Policy Research Institute (PRI). Ahsan H. Mansoor told the media that, firstly, liquidity in the bank has increased due to non-investment besides increase in deposits. Second, the reduction in CRR has resulted in an increase in cash flow. Third, liquidity has also increased due to the increase in remittances.

However, he said the bank's excess liquidity would be reduced if the stimulus package was fully implemented and the economy, including trade, returned to normal.

It may be mentioned that the government has announced an incentive package of around Tk 1 lakh crore in various sectors to address the economic losses of Corona. Bangladesh Bank is providing more than Tk 75,000 crore for this incentive package. To this end, several refinancing funds have been formed and the size of existing funds has been increased. Under this, the banks are getting funds of around Tk 51,000 crore from the central bank.

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