The Bangladesh Bank has entered into agreements with five crisis-hit banks to develop them with ensures for obtaining liquidity enhance from the interbank money market.
If a bank facing a liquidity crisis receives a facility from another bank, this can even demand a guarantee proposal from the central bank accordingly. The Bangladesh Bank will provide guarantee products and services after brooding about the total grief.
To this level, seven distressed banks have applied to the central bank for ensures to access more than Tk25,000 crore in liquidity enhance from the interbank money market.
Firstly, the central bank on Thursday and Sunday signed agreements with five banks – National Bank, Social Islami Bank, First Safety Islami Bank, Union Bank, and Global Islami Bank.
A senior respectable of the central bank acknowledged that the banks with which agreements were signed will now secure funds from the interbank market and post them to the Bangladesh Bank for guarantee, field to board approval. After that, the central bank will assess what quantity of cash every bank can take beneath the guarantee and approve the amount.
Previously, seven banks applied to the central bank for special loans. First Safety Islami Bank sought a guarantee for Tk7,900 crore, Islami Bank Bangladesh for Tk5,000 crore, National Bank for Tk5,000 crore, EXIM Bank for Tk4,000 crore, Global Islami Bank for Tk3,500 crore, Social Islami Bank for Tk2,000 crore, and Union Bank for Tk1,500 crore.
After the autumn of Sheikh Hasina’s executive on 5 August, the boards of those banks were dissolved and reconstituted.
Since November 2022, shoppers were withdrawing liquidity following mortgage fraud incidents exciting several banks managed by S Alam. Which capability that, these banks have confronted a severe liquidity crisis for the previous year and a half, with some struggling to support their money reserve ratio and statutory liquidity ratio.
Additionally, some banks have experienced fresh yarn deficits with the central bank. Vulnerable central bank governor Abdur Rauf Talukdar allowed transactions to continue no topic these negative balances. Alternatively, fresh Governor Ahsan H Mansur has halted the special facility by printing money.
On this context, to tackle the short-time period crisis, an initiative to borrow in opposition to the central bank’s guarantee has been applied. The Bangladesh Bank can even retain Question Promissory notes from the weaker banks.
A central bank govt director told TBS that after a bank is in crisis, special loans are on the whole supplied by the central bank. Alternatively, if the central bank lends without prolong, the money provide will elevate, placing additional stress on inflation. Therefore, the central bank is arranging loans from varied banks in preference to providing money without prolong.
This arrangement, funds will switch from one bank to another, minimising any additional affect on inflation. The central bank’s guarantee arrangement that if these banks fail for any motive, the central bank will duvet that money.
In a press conference earlier this month, the governor acknowledged, “The central bank will no longer provide liquidity support by printing money because it has in the previous. Alternatively, banks can develop this support through interbank forex provide.”
