Cash infusion by Bangladesh Bank lifts banks' spirits: Reports

Media reports maintained this adding this cash infusion has sparked improvements in key liquidity indicators, notably the volume of excess liquidity and uninvested cash in vaults, both of which saw a notable uptick in February.

Excess liquidity encompasses various liquid assets held by banks, while uninvested cash refers to credits available in vaults even if Bangladesh Bank (BB) data revealed a decline in uninvested excess cash.

Meanwhile, commercial banks also reportedly witnessed excess liquidity, indicating a recovery trend even as officials concerned reportedly attributed this improvement to the central bank’s supportive policies, noting that banks have been meeting the government’s borrowing requirements without devolvement, alleviating liquidity strains.

Speaking to media, Emranul Huq, CEO of Dhaka Bank, suggested that alongside increased cash injections, declining demand for credit in certain sectors, such as export-import and offshore banking finance, may have contributed to the liquidity improvements even if Mirza Elias Uddin Ahmed, a top executive at Jamuna Bank, acknowledged that while the sector overall is experiencing surplus liquidity, some banks grappling with rising non-performing loans face liquidity challenges, necessitating support from the central bank.

So, even as Bangladesh’s banking sector witnesses a slow but steady recovery from liquidity shortages, challenges remain for banks with underlying issues like growing NPLs. Nevertheless, overall liquidity conditions are showing signs of improvement, buoyed by the central bank’s supportive measures.

ALCHEMPro News Desk (DR)