Home Today's Paper Most Popular Video Gallery Photo Gallery
Subscription Blog Signin Register
Friday, April 6, 2018 11:07:03 PM
Follow Us On: Facebook Twitter Twitter Twitter Twitter

Liquidity crisis, a tip of iceberg

Economists fear in deep crisis

Economists fear in deep crisis
photo by

Dr Ahsan H Mansu (L) Dr Zahid Hussain (R)

Share your thought
Post a comment »
Read all () »

Kazi Zahidul Hasan :
Terming the current liquidly crisis in banks as the 'tip of an iceberg,' economists hinted on Friday for a highly complex economic situation if the government fails to rein the crisis correctly.
They also criticized the government for taking 'a carte blanche approach,' to the crisis saying this can invite a long-term economic pain.  
"Structural and governance problems are responsible for the liquidity crisis. It's just the tip of an iceberg. A more complex situation would arrive if the government fails to handle the issue properly," economist Dr Ahsan H Mansur told The New Nation yesterday.
High import is another cause for the liquidity crisis.
"Banks are losing deposit every year due to high
interest rate on savings tools. In the last three years, people have been investing heavily on savings tools because of their higher returns. It is leading to leakage of bank's liquid fund," said Dr Mansur.
Moreover, big loan scandals, rising non-performing loans and connected lending by bank directors have pushed many banks to liquidity crisis and financially insolvent.
"The government's latest move to cut the bank's cash reserve requirement (CRR) would not help to ease the current liquidity crunch unless the persisting structural and governance problems are addressed immediately," he added.
"A dramatic increase in import forced banks to buy additional dollar at high rates from the central banks for paying import bills. As a result, big cash went to the central bank's vaults tightening the liquidity situation in commercial banks further," he said.
Dr Ahsan H Mansur also criticized the government for interfering the activities of the central bank saying that it is impeding the proper functioning of the country's apex bank.
"The government's intervention has made the control of the central bank further weak which in turn will further deepen the banking crisis. The central bank is an autonomous body bylaw. So, the government should let the central bank to perform its core activities," he said.
"A deep rooted governance problem along with policy inconsistency has led to the liquidity crisis," economist Dr Zahid Hussain told The New Nation, adding, massively growing import, high credit growth and illicit financial flow are also responsible for the situation.
He said the commercial banks have hiked the interest rate on deposits with cash flow declining. Despite the increased interest rate, money did not come back to them, as people were not interested to put their money in banks due to the government's NSD policy and loan scams.
Dr Zahid Hussain, chief economist at World Bank Dhaka office, said loan irregularities earlier surfaced in the public banks. But now it also spread to private banks eroding confidence of the depositors.
"Banks have failed enhance liquid funds from mobilizing more deposits and recovery of default loans. As a result, they were literally left without any money to extend new loans. It has forced them to approach the government for undue facility to enhance liquid funds," he added.
Expressing dismay over the current state of banking sector, Dr Zahid Hussain, said the whole banking sector now turns into a 'collusive' industry ruled by a politically connected powerful quarter. The quarter has been enjoying undue facilities from the government and regulator time to time taking advantage of their political connection.
"The government move to reduce CRR and keep 50 per cent of its deposit to private banks is the latest example of the undue advantage. The government came up with the move undermining the central bank. Such a government approach could send wrong signal to the sector making the banking crisis more intense."
Dr Zahid Hussain also demanded for immediate review of the government's NSD policy, punitive actions against errant bank directors and wilful defaulters and restore corporate governance in banks.
"If the government fails to come up appropriate measures, a worse situation may appear in the scene severely impacting trade, investment and economic growth,' he added.

Add Rate

News Archive

Inside The New Nation

Editorial »

Formulate pragmatic policies, save education sector

THE New Nation yesterday reported that about three lakh students have dropped out from the ongoing Higher Secondary Certificate (HSC) and its equivalent examinations. As many as 13,03,786 students registered with 10 education boards, but only 10,18,411 examinees are taking part as regular students, that resulting in 2,85,375 students dropped ...

Cricket »

Nazmul Islam of Sheikh Jamal Dhanmondi Club Limited poses with the Man of the Match award after the super league match of the Walton Dhaka Premier Division Cricket League between Sheikh Jamal Dhanmondi Club Limited and Khelaghar SKS at the Sher-e-Bangla National Cricket Stadium in the city's Mirpur on Thursday.

Entertainment »

Nidhhi Agerwal’s version of Havana will make you want to hit the dance floor

Nidhhi Agerwal who made her debut with a dance film took to Instagram to share a video of her showcasing her dance moves. The actress is a brilliant dancer and won hearts of the audience with her debut film. Nidhhi who occasionally keeps sharing insights into her life via social ...

Entertainment »

Anupoma Mukti without mom for first time

 Entertainment Report :Last December popular singer Anupoma Mukti lost her mother Hasna Hena. For the first time he will pass her birthday today without mother for the first time. While asking her about celebration of her birthday Anupoma Mukti became gloomy. She said, “My mother on my birthday always called ...

City »

BNP Secretary General Mirza Fakhrul Islam Alamgir speaking at a press conference on 'Present Situation of the Country' after distribution of nomination papers for Khulna and Gazipur City Corporation polls at the party central office in the city';s Nayapalton on Thursday.

International »

Koreas hold preparatory talks to set up Kim-Moon summit

AP, Seoul :The rival Koreas held preparatory talks Thursday for a summit later this month between North Korean leader Kim Jong Un and South Korean President Moon Jae-in amid a global diplomatic push to resolve tensions over the North's nuclear program.The meeting of working-level officials at the border village of ...

Editorial »

Media should run freely and fearlessly

Indian Prime Minister Narendra Modi on Monday ordered the withdrawal of rules punishing journalists held to be responsible for distributing ‘fake news’, giving no reason for the change, less than 24 hours after the original announcement. The move followed an outcry by journalists and opposition politicians that the rules represented ...

Football »

Ronaldo scores as Madrid beat Juventus 3-0 in CL

AP, Turin :Cristiano Ronaldo latest masterpiece was so good even the opposing fans had to stand up and applaud.Ronaldo pulled off a spectacular overhead kick to score his second goal of the night on Tuesday as his Real Madrid beat Juventus 3-0 in the first leg of their Champions League ...

Football »

Andrew Ord quits job

Sports Reporter :Head Coach of Bangladesh National Football team Andrew Ord submitted his resignation letter to BFF recently.Bangladesh National Football team went to Laos and played a FIFA International Friendly match against Laos National Football team on March 27. The match ended in a 2-2 draw. After that, members of ...

City »

Former Vice-Chancellor of Dhaka University Prof Dr Emajuddin Ahmed speaking at a rally organised by Bangladesh Youth Forum at the Jatiya Press Club on Wednesday demanding release of BNP Chairperson Begum Khaleda Zia and other leaders and activists of the party.

Entertainment »

Aparna’s play Shobdera Framey Bondi

Entertainment Report :Many colleagues of popular actress Aparna Ghosh often said that if Aparna was used properly the industry can get some better works in media. Many directors try to utilise her talent in their works. Recently Aparna worked under direction of Progga Niharika, Rupok Roy, Alamgir Sumon and Sajib ...

Entertainment »

Mithila anchoring radio show Berey Uthar Golpo

Sheikh Arif Bulbon :Popular model and actress Mithila has started to anchor a brand new radio show titled Berey Uthar Golpo. The show, which is about early childhood development, is being aired live on Radio Shadhin 92.4 FM every Wednesday from 8:30am to 10:30am. Attending the show, guests get the ...

International »

Broken by siege, Syria rebels face worst loss yet in Ghouta

AFP, Beirut :The expected loss of Eastern Ghouta will deal Syria's fragmented rebels their biggest blow yet, leaving them unable to threaten President Bashar al-Assad in Damascus and increasingly subservient to competing global interests.Just weeks after their ill-fated uprising turned seven years old, Syrian opposition fighters have found themselves bussed ...

Editorial »

Dhaka wants Moscow`s support in resolving Rohingya crisis

DHAKA has sought Moscow's support in resolving the Rohingya crisis. Foreign Minister A H Mahmood Ali made the call at a meeting with the Russian Foreign Minister Sergey Lavrov in Moscow last Monday.  Better late than never, it was an important plea which should have been taken sooner when the ...

Cricket »

New Zealand draw 2nd Test against England, clinch series

AP, Christchurch :England's long and cheerless summer in the southern hemisphere ended in a final, bitter disappointment Tuesday when victory in the second test against New Zealand slipped through its fingers and it had to accept a 1-0 series loss.Set 382 to win or more than a full day to ...

Items that you save may be read at any time on your computer, iPad, iPhone or Android devices.
Are you new to our website? Do you have already an account at our website?
Create An Account Log in here
Email this news to a friend or like someone
Write a comment to this news