Troubled banks will be able to pay back depositors’ money from Sunday: Governor

Troubled banks will be able to pay back depositors' money from Sunday as the Bangladesh Bank has provided liquidity support to meet their cash shortfall, Governor Ahsan H Mansur said today (28 November).

He gave assurance that depositors will not be disappointed when they go to withdraw their deposits from Sunday.

"However, no bank in the world can survive if all depositors withdraw money at once. So, I would urge customers not to withdraw more money than necessary," he said at a press conference at its headquarters.

The governor said the Bangladesh Bank resumed liquidity support to problem banks and is providing Tk22,500 crore based on their needs.

Of them, First Security Islami Bank received Tk5,500 crore, Social Islami Bank Tk4,000 crore, Exim Bank Tk5,000 crore, and National Bank Tk4,000 crore while Union Bank will get Tk2,000 crore and Global Islami Bank Tk2,000 crore shortly.

The governor said the central bank backtracked from its earlier stance of not printing money for the sake of depositors.

However, it will not create inflationary pressure as the central bank also introduced new instruments to mop up money from the banks that have excess liquidity. "In this way, the net reserve money will not increase," he added.

The big difference in printing money from previous practice during the Hasina government is that problem banks have been restructured and are now strictly monitored, Mansur said.

He said problem banks were provided liquidity support by creating new money without taking punitive actions against the wrongdoers.

The governor said, "The central bank will ensure complete security for depositors' funds. We aim to fully restore the confidence of all bank customers. Since I assumed office, the central bank has stood by every bank that has faced difficulties."

The central bank is providing funds to the banks to stabilise the overall economy of the country and to maintain balance. "However, our contractionary monetary policy will continue to control inflation."

No hiding of non-performing loans

During the previous government's tenure, the central bank provided funds, which bank directors misappropriated in various ways, said the governor. "However, now we are providing fund support to resolve the crisis in the banks. There is absolutely no scope for new irregularities in loans," he said.

When asked about the new circular on loan classification and provisioning, Mansur said, "We will align all activities in the banking sector with international standards. I will not take responsibility for what happened during the tenure of the previous government's governors. However, I have no intention of sweeping non-performing loans under the carpet."

S Alam blamed

The current increase in non-performing loans is revealing the true picture of the banks, said the governor. In the coming quarters, non-performing loans are expected to rise further, he said. 

"Once the actual financial indicators of the banks come to light, we will take effective measures to recover from this dire situation," said Mansur.

When asked about S Alam threatening to file a lawsuit against him, the governor said, "I am not concerned about what S Alam says or does. We will take legal action regarding the funds he has misappropriated from the banking sector. However, S Alam is one of the key individuals responsible for bringing the country's banking sector to its current dire state.