Excess liquidity in the banking sector piled up to a decade high in the year 2013 due to lack of credit demand and sluggish investment climate amid prolonged political unrest over 5 January national polls.
The surplus liquidity stood at 15.38%, which was 32.54% of the total liquid asset in the banking sector in the last year. It was 9.9% in 2003, according to a publication of Department of Off-site Supervision (DOS) of the central bank.
Bangladesh Bank (BB) Deputy Governor Abu Hena Md Razi Hassan unveiled the publication titled “Bangladesh Bank’s Off-site Supervision, Recent initiatives” at a ceremony held yesterday at its headquarters in the capital.
The ceremony was attended, among others, by executive director of Naushad Ali Chowdhury and SM Moniruzzaman and General Manager of the bank Rabiul Hassan.
The rate of excess liquidity remained below 10% in the last 10 years and it reached over 15% in the last one year, according to the publication.
The amount of surplus liquidity came down to 6% in 2010 from 9% in 2009 as maximum bank diverted their huge investment towards the capital market, said a senior executive of the central bank.
The banks started to withdraw their investments at the beginning of the year 2011, soon after the market crash, as they were strongly monitored by the central bank to reduce their excessive investment beyond their limit, he added.
The banks, though, turned down their investment position from the share market but they did not get alternative opportunity to move their business due to the then political unrest.
As a result, excess liquidity of the banking sector was increased by more than double times in the last three years, he said.
The surplus liquidity of the state-owned commercial banks stood at 25.29% of the total liquid asset of 44.27% followed by specialised banks at 4.19% of 15.27%, private commercial banks at 11.18% of 27.95% and foreign banks stood at 27.35% of total liquid asset of 46.15%, according to the central bank data.
The profit indicators of the banking sector dropped more than half in the last three years from 2010 due to lack of investment opportunity.
The return of asset (ROA) of the banks came down to 0.90% last year from 1.8% in 2010 while return on equity (ROE) dropped to 10.77% from 21%.
The Non Performing Loan (NPL) of the banking sector increased by 100% in the last one decade. The amount of NPL stood at Tk40,583 crore in the last year compared to Tk20,320 crore in 2003, according to the central bank data.
Out of the 100% increase of NPL in the last 10 years, mainly 88% NPL was increased only in three years in between 2010 and 2012 due to several loan scam, said another senior official of the central bank.
The total NPL in the banking sector reached at the highest level at Tk42,726 crore in 2012. Then central bank had relaxed the loan reschedule rule for the banks to reduce their abnormal classified loans burden and lastly it came down to 2.01% of the total loan in 2013 from 4.38% in 2012, he said.