• Friday, Jan 21, 2022
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Bangladesh Bank again extends deadline to adjust ADR ratio

  • Published at 10:47 pm March 7th, 2019
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The Bangladesh Bank logo is seen at its office building in capital Dhaka Mehedi Hasan/ Dhaka Tribune

Experts say now the central bank should act without extending the deadline

Bangladesh Bank on Thursday extended the deadline for banks to adjust their advance-deposit ratio (ADR) by six months to September 30 this year, stated a circular issued to this effect on Thursday.

The central bank has extended the deadline for four times in response to demands of the commercial banks.

“The deadline was extended again for banks due to their application.  A few banks will take more time to lower advance-deposit ratio. They are trying to lower their advance-deposit ratio,” Bangladesh Bank Executive Director and Spokesman Serajul Islam told  the Dhaka Tribune. 

On January 30, 2018, the central bank asked conventional banks to lower their ADR to below 83.50% by June, 2018 from the existing ceiling of 85% and Shariah-based banks to 89% from 90% to control aggressive lending practices.

The banking regulator extended the deadline to December, 2018, amid pressure from directors of commercial banks.

But the central bank was later forced to extend the deadline to March 31, 2019, as some banks have plunged into an acute liquidity crisis after the emergence of the Farmers Bank debacle. 

In January 2018, in response to the demands of the directors of commercial banks, the central bank had also slashed the cash reserve requirement by one percentage point to 5.5% to inject additional estimated fund of Tk10,000 crore into the market. 

Further, the Ministry of Finance decided to allow ministries and other state agencies to deposit 50% of their funds with private banks from the previous ceiling of 25%, in response to another demand of the Banks’ directors. 

Talking to the Dhaka Tribune, the bank’s former governor Salehuddin Ahmed said that, it reflects the weakness of the Bangladesh Bank as a regulator. Now BB should act without extending the deadline.

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