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At least a dozen banks in the country are facing a severe cash shortage. The crisis in some banks is so dire that their cash counter operations have been largely limited. Depositors are visiting these banks only to withdraw money, with no one making deposits. And many customers are leaving empty-handed as they cannot withdraw funds. Bangladesh Bank has initiated a plan to lend money to the troubled banks as quickly as possible to ease the situation.

Yesterday (Wednesday, September 25), Governor Dr. Ahsan H Mansur held a meeting with the managing directors (MDs) of nine banks that are in a healthy cash position. During the meeting, the governor stated, “The troubled banks must be ensured quick access to loans. If any borrowing bank fails to repay the loan on time, Bangladesh Bank will cover the amount with interest within three days.”

Since Ahsan H. Mansur took office as the governor, Bangladesh Bank has dissolved the boards of 11 private banks, forming new boards for them. Due to previous irregularities and corruption, the liquidity situation in these banks had already deteriorated. After the boards were dissolved, panicked depositors rushed to withdraw money en masse. However, these banks currently do not have the capacity to meet the withdrawal demands. Under former Governor Abdur Rouf Talukder, new money was printed to lend to these struggling banks. However, the current governor has stated that Bangladesh Bank will not lend to any bank by printing money. Instead, banks with surplus liquidity will lend to the struggling banks, with Bangladesh Bank providing a guarantee. Despite the governor’s directive, banks with surplus liquidity have shown little interest in lending to weaker banks.

Against this backdrop, the governor held a meeting yesterday (Wednesday, September 25) with the top executives of nine banks with surplus-liquidity. The MDs and representatives of Mutual Trust Bank (MTB), The City Bank, Dutch-Bangla Bank, Eastern Bank, BRAC Bank, Pubali Bank, Dhaka Bank, and Shahjalal Islami Bank were present at the meeting, as well as a representative from the state-owned Sonali Bank.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, also participated in the meeting. He told Bonik Barta, “The governor has instructed that liquidity should be supplied to the weak banks as quickly as possible. Each of the healthy banks will submit a proposal to Bangladesh Bank to lend to three weaker banks. Based on the needs of the weaker banks, Bangladesh Bank will issue further directives. If the weak banks fail to repay on time, Bangladesh Bank will return the amount with interest within three days, as assured by the governor.”

When asked how long it would take for the weak banks to receive the funds, Syed Mahbubur Rahman said, “Bangladesh Bank did not set a specific timeline. We have to pass the proposal through our boards, which could take five to seven days. We will try to pass the proposal quickly and send it to Bangladesh Bank.”

Among the banks with liquidity crisis, Islamic Bank Bangladesh PLC, First Security Islami Bank, Social Islami Bank, National Bank, EXIM Bank, Global Islami Bank, and Union Bank have already signed agreements with Bangladesh Bank to receive guarantees.

When asked about the situation, National Bank’s reformed board’s chairman Abdul Awal Mintoo told Bonik Barta, “The time to turn around struggling banks is slipping away. The situation is worsening by the day. Liquidity support needs to be provided quickly. Where BDT 20 billion was previously sufficient, even more funds are now needed. In the current situation, both the banking sector and the country’s business and economy are suffering.”

A similar sentiment was expressed by Mohammad Abdul Mannan, chairman of First Security Islami Bank’s reformed board. He told Bonik Barta, “After the board restructuring, we have already recovered BDT 3 billion in loans. However, due to the lack of cash flow, the bank is unable to recover fully. The delay in lending cash is worsening the situation.”