Is Banking sector going to face turmoil?


Widely known Corona pandemic, imposed our government to take some quick, wise, and timely decisions such as government seemingly announced Tk. 100,000 crore economic stimulus package with several components targeting different parts of the private sector, agriculture sector and health sector for the purpose of saving our economy from the upcoming recession.

Our country definitely has eligibility to overcome the upcoming challenges due to the Corona pandemic with the help of ensuring proper utilization of stimulus packages and ensuring smooth operations of all the business sectors. We welcome our prime minister for taking all crucial decisions timely, effectively and efficiently.

Currently, however, Bangladesh Bank decided that the interest on all types of bank loans from April 01 to May 31 would have to be transferred to interest-free blocked accounts and not to show those in banks’ income accounts considering the inconvenient situation for Covid-19. If any bank already transferred interest to the income account, it has to be adjusted through reverse entry.

If the Banks do so, the whole sector may have to face economic turmoil due to negative interest earnings in response to interest payments. It may create reinvestment fund crisis, and true money circulation. Government may print money to overcome the situation, but it will create devaluation of money and inflation. It may impose Bank to have a negative figure after tax income and eventually share price will decline tremendously.

Government have to save our Banking sector from the upcoming recession as well, otherwise, our international business will be hampered due to subsequent lose incurred by as the Banks. The Banks are the face of a country’s economy.

BB may take some bailout packages to save our Banking sector from upcoming recession such as reducing the Bank Rate to 1% (One percent) which is currently 5%, reducing CRR to 2% which is currently 4% on total demand and time liabilities (TDTL) and SLR to 5% (Five Percent), which is currently 13% Or resetting 93% AD ratio and provide all private banks at least 1000 to 2000 Crore interest free loan for the next three years depending upon the assets size of a bank.

As father of Banks, BB should announce the some effective bailout packages for saving our Banking sector on an urgent basis.

Mother of Humanity, our Prime minister, and respected authorities, please consider the issues for saving our Banking sector from upcoming economic turmoil as you know Banks are mostly correlated with other sectors. If Banks have to face crisis, the whole economy will face ultimate recession challenges as well.

Writer: Mohammad Nure Alam, Banker