BB will lift LC restrictions for crisis-hit banks

Bangladesh Bank (BB) has decided in principle to withdraw restrictions on opening letters of credit (LCs) by six crisis-hit banks, according to officials.

The measure, imposed in August this year, prevented banks from opening LCs only by maintaining a 100 percent margin.

The development came after a meeting at the Bangladesh Bank headquarters yesterday between officials of the ailing banks and central bank officials.

Bangladesh Bank Governor Ahsan H Mansur chaired the meeting while Nurun Nahar, Md Habibur Rahman and Md Kabir Ahmed, deputy governors of the central bank, were also present.

The six banks have also asked the central bank to quickly process the liquidity support, which is being offered through the interbank money market

On the other hand, directors and chairmen of Bangladesh Commerce Bank, Padma Bank, Union Bank, Social Islami Bank, First Security Islami Bank and ICB Islami Bank were present.

Contacted, Director (Acting) of Social Islami Bank, Mohammad Forkanullah told The Daily Star that the Governor responded positively to their request.

Forkanullah said the central bank invited them to learn about the latest developments, including loan recovery, deposit mobilization and overall banking activities.

After the political upheaval on August 5, the boards of all six lenders, except Padma Bank, were reconstituted.

Speaking on the condition of anonymity, a senior central bank official also confirmed to The Daily Star that the governor had agreed to ease restrictions.

The six banks have also requested the central bank to quickly process the liquidity support offered through the interbank money market.

They also urged the central bank to intervene and reduce the profit rates charged to them for using liquidity support.

Speaking on condition of anonymity, the chairman of one of the crisis-hit banks told this newspaper that the ongoing process of providing liquidity support to them is not “well designed”.

“We need quick and accumulated liquidity support rather than getting it step by step to address ongoing deposit withdrawal pressures.”

The official added that the banks providing the aid are exploiting their situation by imposing high profit rates.

In response, central bank officials said interest rates were determined by the market and the regulator would not intervene in this regard.