'Tough time for banks'
Bangladesh Bank (BB) expressed its concern that profits and capital resources of country's banks and financial institutions may shrink in the next two years. The BB has asked the banks to reduce the gap between deposit and loan interest rates. The rate of interest should be nominal and stable to handle the situation, the central bank sources said.
The BB has also said that the interest rate on loans should not be higher than the set level. The rate of the interest must be in single digit. As a result profits of the banks and financial companies may shrink. It may seriously put an impact on the capital.
The banks and financial institutions are facing credit crises as number of government and private banks are involved with financial scandals which seriously affected customer's confidence in banks.
According to Bangladesh Bank, private banks' deposits have recently declined dangerously. Currently the state-owned banks are main sources of fund to make up the liquidity crisis. Syed Mahbubur Rahman, Chairman of the Association of Bankers, Bangladesh (ABB) told The Asian Age that the rate of growth of deposits has fallen dramatically. Banks' funds are getting stuck-up due to default loan.
He said that most of the banks have already focused on increasing their deposit which is a very good sign. The banks are analyzing the information and data and taking precautionary measures to face any risk. Ahsan H Mansur, Executive Director of the Policy Research Institute of Bangladesh, said if the quality of performance of the banks does not improve then it will be hard for them to make profit.
An aggressive investment management profit policy of the banks can prove risky in the long run. Such a policy apparently increases profit but it can create problems later. Khondokar Ibrahim Khaled, Former Deputy Governor of the Bangladesh Bank said that the activities of the banks have been boosted.
The banks have to perform several roles including financing of import and export. Most of the trading and transactions are being through banks.
On the other hand, banks hardly can now control the bad loans. This is affecting the banks and country's economy hard, he added.
Source: https://dailyasianage.com