National Bank gets Tk1,000cr from BB to fight liquidity crunch

National Bank PLC, facing a severe liquidity crunch, secured Tk1,000 crore in emergency funding from Bangladesh Bank (BB) ahead of Eid, officials told The Business Standard.

The 90-day facility, offered at an 11.5% interest rate, is intended to help the bank manage the spike in withdrawals during the festive period.

A senior Bangladesh Bank official said the support was necessary as National Bank struggled to return deposits to customers on time. Available deposits and loan recoveries were insufficient to cover cash requirements.

"Of the Tk1,000 crore, Tk250 crore was released on 11 February – a day before the 13th national election – while the remaining Tk750 crore was released by the Bangladesh Bank on 15 February, during the tenure of former central bank governor Ahsan H Mansur," the BB official further said.

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A senior National Bank official said, "The bank approached us to maintain proper cash flow ahead of Eid, when withdrawal demand rises sharply."

Experts have highlighted that such liquidity injections are essential to prevent bank failures but warned of their inflationary impact.

Md Ezazul Islam, director general of the Bangladesh Institute of Bank Management (BIBM), said, "Bangladesh Bank must maintain financial stability. Banks in crisis need support, or they may collapse, affecting the broader economy. At the same time, printing money for liquidity can fuel inflation and counteract monetary tightening measures."

Another senior Bangladesh Bank official noted that the liquidity was provided against demand promissory (DP) notes, which temporarily increased the money supply and could further drive up inflation.

Bangladesh Bank has maintained a contractionary monetary policy, keeping the policy rate at 10% for the first half of this year to curb inflation.

National Bank has faced longstanding governance and liquidity challenges. For much of the previous Awami League government's tenure, the bank's board was dominated by the influential Sikder Group.

Following the death of chairman Zainul Haque Sikder, internal disputes among his heirs destabilised the bank.

In December 2023, the board was dissolved, and independent director Syed Farhat Anwar was appointed chairman. During his tenure, discussions began to merge the National Bank with United Commercial Bank (UCB), though the plan was later abandoned by the Bangladesh Bank.

In May 2024, a new board was appointed, transferring control to the Chittagong-based S Alam Group, whose representatives managed the bank through multiple affiliated companies.

Following political changes, the S Alam representatives stepped down, and Abdul Awal Mintoo, former vice-chairman of BNP and now environment minister, returned as chairman.

Since then, National Bank has repeatedly faced liquidity crises, prompting Bangladesh Bank to provide emergency support multiple times.

Senior officials noted that liquidity pressure typically rises ahead of Eid, as withdrawal demand spikes and the bank's deposits and loan recoveries alone cannot bridge the gap.