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 efficiently amid business collapse, tight liquidity situation and higher defaulted loans.
The Association of Bankers, Bangladesh (ABB), a forum of bank managing directors, took the decision yesterday at a meeting.
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 due to 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 a majority of the banks have been hit hard by the liquidity crunch as a good number of individual and corporate clients are withdrawing funds on a regular basis due to the ongoing economic fallout from the pandemic.
"All types of businesses of banks have come to a halt. But we have to implement the financial packages using our own funds. So, we need 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 cut the CRR by 50 basis points to 5 per cent, injecting about Tk 6,400 crore into the economy.
But the policy measures are not good enough 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 per cent.
If both are slashed, it would free up more than Tk 3,000 crore.
The ABB will also urge the BB to consider the reduction of policy rate to the maximum level.
Lenders are also in confusion over the terms and conditions of the Tk 5,000 crore bailout package for exporters, the MD said.
A large amount of provisioning would be needed if a portion of the funds becomes defaults, which will create a problem for lenders down the road.
So, the ABB would seek a clarification from the BB on whether they will have to keep provisioning against the defaulted loans.
The banking sector, which is already struggling with heaving soured loans, will face a good amount of defaulted loans in the days ahead as the capacity of many clients to pay back credits is eroding.
Defaulted loans totalled Tk 94,313 crore at the end of 2019, up 0.42 per cent year-on-year, according to data from the BB.
Both the 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 check, the banking sector and the whole economy will face a severe crisis," said the third MD.