• Wednesday, Oct 05, 2022
  • Last Update : 10:24 am

Surplus liquidity dips in February as demand for credit rises

  • Published at 03:21 pm April 6th, 2021
Surplus Liquidity in banks 2020 2021

The falling trend would not sustain owing to the second wave of Covid-19, says experts

Surplus liquidity in the banking sector, which began to decline from January earlier this year, continued its dip in February, due to increasing demand for credit in the economy.

At the end of February, excess liquidity stood at Tk200,000 crore, down from Tk204,070 crore a month ago.

The surplus fund, however, rose 92.42% in February compared to the same month a year ago, when the amount stood at Tk103,934 crore.

In February, private sector credit growth stood at 8.93%, up from 8.32% in the previous month, according to Bangladesh Bank data.

The fund, the biggest in the banking sector, began to witness a decline from January mainly due to the increasing demand of credit, said M Kamal Hossain, managing director of Southeast Bank.

He also said that the falling trend of surplus liquidity would not sustain in the upcoming days as the country’s economy and business is going to face a lacklustre situation again owing to the second wave of the Covid-19 pandemic.

If the Covid-19 infection rate continues to increase, the clients will stop coming to the banks, the Southeast Bank MD further said.

The amount of excess liquidity in the banking sector rose every month last year due to lower credit demand and the expansionary monetary policy announced by the central bank.

The central bank is also injecting funds to the financial sector with stimulus packages.

In July last year, to steer the economy away from a steep downturn, the BB rolled out a vastly expansionary monetary policy for fiscal 2020-21.

The central bank in February this year decided that the monetary policy would continue during the second half of this fiscal year.

Echoing Hossain, Dhaka Bank Managing Director Emranul Huq said that the record amount of excess liquidity started to fall after eight months because the credit demand started to rise ahead of Pohela Boishakh and Eid-ul-Fitr - the two biggest festivals in Bangladesh.

He also said that the future is uncertain as the second wave of deadly virus has hit in the country.

From July to February of the present fiscal year, Import growth rose by 1.91% to $37.06 billion from $36.37 billion in the previous fiscal year, which also reflected that the country’s business and economy had started to recover from the stressful situation brought on by the Covid-19 pandemic.

The country’s economy and businesses are going to face a disaster if the Covid-19 infection rate keeps increasing with each passing day, said Zahid Hussain, former lead economist of the World Bank Dhaka office.

"If we are not able to control the infection rate, it will be a big concern for our country’s trade and economy," Hussain further said.

“We have to control the infection rate through strict rules and regulations and awareness, utilising the experiences from last year,” the economist added.

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