Seven banks were credit-happy amid the pandemic

When the majority of the banks remained cautious in lending amid the COVID-19 pandemic, seven lenders crossed their allowed loan to deposit ratio, leaving their financial health in a precarious state ahead of the anticipated surge in soured loans for the withdrawal of loan moratorium facility from this year.

As of December 31, last year, BASIC, National, NRB Global (now Global Islami Bank), Padma, the Islamic window of Premier Bank, Standard Bank and Rajshahi Krishi Unnayan Bank crossed its loan-deposit limit set by the central bank. 

As per the central bank regulations, the loan-deposit ratio for the conventional banks is 87 per cent and for Islamic banks 92 per cent.

This means, the conventional banks will be able to lend up to Tk 87, when its deposits are at Tk 100. Islamic banks will be able to lend up to Tk 92 from their deposits of Tk 100.

The seven banks crossed the limit at a time when the private sector credit growth remains depressed.

In December last year, the private sector credit growth stood at about 8.4 per cent, much below the central bank’s target of 14.8 per cent for this fiscal year.

The lenders that trespassed limit set by the central bank have not made aggressive lending in recent times, said a top official of the central bank seeking anonymity to speak candidly on the matter.

Many of them lost their deposits amid the pandemic, which impacted their ratio. 

The central bank always cautioned the banks and asked them to lower their lending in line with the ceiling for loan-deposit ratio, he added.

As of December 31 last year, the scam-hit BASIC Bank’s total deposit stood at Tk 14,304.4 crore but it lent Tk 15,166.6 crore. 

National Bank’s credit growth was 12.9 per cent, while its deposit growth was 17.9 per cent.

“Our ratio has come down now and will go below the ceiling soon,” said ASM Bulbul, managing director (current charge) of National Bank. 

In January, NRB Global Bank has been renamed Global Islami Bank, meaning the 87 per cent-ceiling applicable for standard banks are not applicable.

“Our ratio is now below the central bank limit as this is a shariah-based bank,” said its MD Syed Habib Hasnat.

NRB Global Bank had crossed the limit in December last year owing to several technical reasons.

“We were in the process of transformation from conventional to Sharia Based then,” he added.

Standard Bank is another lender that became a Shariah-based one this year.

“We crossed the central bank limit in December last year owing to the falling trend of deposits,” said Khondoker Rashed Maqsood, the MD of Standard Bank.

In the last year, the bank’s credit growth was only at 1.57 per cent. 

“We have left some more expensive deposits last year to optimise the balance sheet,” he added.

Padma Bank, another scam-hit bank, has been an offender for several years now.

Its MD Md Ehsan Khasru had said a few months ago that they reduced the limit from the previous level. 

“This is not the overall scenario of the bank,” said M Rezaul Karim, the MD of Premier Bank.

The bank’s Islamic banking window has exceeded the loan-deposit ceiling.

“We have more customers in this branch so the investment is more,” he added.

State-run specialised lender Rajshahi Krishi Unnayan Bank’s credit growth was 9.20 per cent and its deposit growth 8.74 per cent.