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Despite the fears of corona infection in the country, the situation is still not normal. As a result, no one wants to risk new investments for uncertainty. This has reduced the demand for loans in the private sector. In this situation, most banks have lazy money on their hands. According to the Bangladesh Bank, the amount of excess liquidity in the banking sector exceeded 200,000 Tk crore at the end of December 2020. From this, the amount of money that is not in any type of investment (lazy money) is approximately 45 thousand crore rupees. Lazy money has doubled in the last three months. There is lazy money in all banks in the public, private and foreign sectors.
Economists say the Corona situation has reduced demand from many sectors for goods and services. As a result, new investments are kept away and existing production capacity is not fully utilized. This is not a good sign for the economy at all. Because this money would have been invested if the economy had maintained its normal rhythm.
Former financial advisor to the interim government. AB Mirza Azizul Islam told Kaler Kanth that the pace of private debt was slow even before the Corona outbreak. It has become more to the downside since Corona. Because entrepreneurs do not seek new investments. As a result, imports of capital goods, industrial raw materials and intermediates are also declining. This means that the production capacity is not being fully utilized. For these reasons, the demand for loans in the private sector is lower. In this situation, banks have increased excess liquidity and lazy money. This is not a good sign for the economy at all.
The money supply in the market has been increased under various incentive packages to increase demand in the economy when corona infection begins. Again, remittances to banking channels in Corona are much higher. There has also been good growth in the collection of bank deposits. But there has been no demand for new loans in recent months outside of incentive loans. Still, surplus liquidity and lazy money in the bank’s hands has increased, officials responsible at the Bangladesh Bank said.
According to the Bank of Bangladesh, at the end of last December, excess liquidity in the banking sector stood at around two lakh four thousand 736 crore. Three months ago, the excess liquidity in the banking sector was Tk 1,79,750 crore. And in the past three months, excess liquidity has increased by about 35,8 crore rupees. At the same time, the amount of lazy money in the hands of banks has also increased. At the end of last December, the amount of lazy money in the banking sector stood at Tk 44,062 crore. This figure is higher than at any time in the past, three months ago through September, which was 21,746 crore. In February, the month before the outbreak of the crown, the amount of lazy money was only Rs 6,399 crore.
When asked, Syed Mahbubur Rahman, former president of the Bangladesh Bankers Association (ABB) and CEO of a private, mutual trust bank, told Kaler Kanth: “We want to invest; But the investment that I will make, there must be that demand. Everything has been slowed down by Corona. There is no new investment. When asked if banks are taking extra precautions when investing because of Corona, he said: “Yes, there will be some extra precautions. It needs to be done. We want to lend; but if we can’t give it to the right place, then the fear of going back remains.”
The recent decline in private sector credit and the decline in imports of industrial capital goods also reflect a decline in private investment. According to the Bank of Bangladesh, credit to the private sector grew only 7.61% compared to the annual target of 14.6% last fiscal year. This was the lowest in the last eight years. Even in the current financial year, the Saturn phase continues in private sector debt. Until last December, growth was only 7.37 percent against the target of 11.5 percent. This is the lowest of the commemorative period. On the other hand, in the first six months of the current financial year (July-December), the importation of capital goods from the industry decreased by 36.58 percent. Capital equipment is imported for factory expansion, renovation and establishment of new factories. Not only capital equipment, but also intermediate industry imports have decreased by around 18.22 percent during this period. In addition, the import of industrial raw materials also fell by 3.33 percent.
Meanwhile, the bank’s sources of mutual funds are also normal in Corona. The Bangladesh Bank report shows that the annual growth of deposits has been 13.28 percent until last November. Annual deposit growth was 12.72 percent through February of last year, the month before Corona started. In addition, the central bank has established a series of refinancing funds and has increased the size of existing funds so that banks do not go into crisis by disbursing loans for various incentive packages announced by the government to cover the loss of the crown. According to this, banks get around Tk 51,000 crore from the central bank. Additionally, the CRR has been reduced from 1.5% to 4% in two phases. As a result, banks have acquired the ability to lend another Tk 19,000 crore. Additionally, the repurchase rate has been lowered to 4.75 percent in three phases to increase liquidity at the bank. A special one-year repository has been introduced. After 18 years, the bank rate was lowered from 1 to 4 percent.
On the other hand, remittances sent by expatriates during Corona continue to recover. As a result, Bangladesh Bank has been buying a large amount of dollars in the market for several months to keep the exchange rate stable. As a result, the cash also goes to the bank to buy dollars.
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