16 banks exceed loan limits, raising concerns over customer deposits and liquidity

16 banks have been found violating the established limits for loan disbursement, with analysts warning that this could increase the risks to both the banks‍‍` liquidity and their customers‍‍` deposits. 

Experts are now calling for stronger measures to ensure the protection of public savings.

According to the regulations set by Bangladesh Bank, conventional banks are allowed to lend up to 87 Taka for every 100 Taka in deposits.

Islamic banks, on the other hand, are permitted to lend 92 Taka for every 100 Taka. 

This is known as the Advance-Deposit Ratio (ADR). By the end of December, 16 banks had exceeded these limits.

National Bank has topped the list of conventional banks, with its ADR surpassing 113%. Exim Bank follows with an ADR of 111%. 

Other banks in violation include Janata Bank, Basic Bank, AB Bank, and UCB. 

In the Islamic banking sector, Bangladesh Commerce Bank‍‍`s ADR has reached a staggering 140%, while several others, including First Security Islami Bank, SIBL, Union Bank, AB Bank, and Global Islami Bank, have ADRs exceeding 100%.

Commenting on the issue, Arif Hossain Khan, spokesperson for Bangladesh Bank, stated, "The excessive profit-seeking behavior of the banks is putting them at risk, creating liquidity problems that ultimately harm the depositors."

By December’s end, conventional banks had issued loans worth an extra 62,640 crore Taka, while Islamic banks had over-invested by 53,793 crore Taka. 

These breaches have raised alarms about the safety of depositor funds, prompting calls for stricter regulations and enforcement from Bangladesh Bank.

Toufiq Ahmed Chowdhury, former Director-General of the Bangladesh Institute of Bank Management (BIBM), emphasized, "The central bank must take a firmer stance. You’re supposed to be ensuring compliance, but it seems everyone is non-compliant. I believe this is a failure on the part of the central bank. Why did they allow these banks to violate the rules?"

In addition to stricter regulations, experts are urging banks to step up efforts in recovering non-performing loans (NPLs), as these could further exacerbate the financial instability.

As concerns about the stability of the banking sector continue to grow, it remains to be seen whether Bangladesh Bank will take stronger actions to protect public savings and maintain confidence in the banking system.