12 banks warned for higher credit growth than deposits

AKM Zamir Uddin | Published: 22:32, Feb 27,2017

 
 

Bangladesh Bank has warned 12 commercial banks due to their higher credit growth than collected deposits.
The BB issued a letter to managing directors and chief executive officers of 12 banks on February 2 asking them to decrease their credit growth considering the deposit growth within the shortest possible time as they are now involving in aggressive banking.
The central bank in its letter said that an imbalance situation had been created between deposit growth and credit growth of 12 banks as they disbursed more loans than their deposit collection from the clients.
According to the BB data, the year-on-year credit growth of Farmers Bank stood at 60.13 against a deposit growth of 27.76 per cent as of January 19, 2017, that of Modhumati Bank 48.20 per cent against 16.82 per cent and that of NRB Global Bank 78.72 per cent against 57.81 per cent.
As of January 19, the credit growth of Premier Bank stood at 27.15 per cent against the deposit growth of 13.85 per cent on the basis of year-on-year, that of ONE Bank 28.40 per cent against 17.06 per cent, that of Prime Bank 12.63 per cent against 1.84 per cent, that of Jamuna Bank 26.36 per cent against 15.83 per cent, that of Mercantile Bank 17.08 per cent against 7.24 per cent and that of NRB Commercial Bank 47.68 per cent against 38.36 per cent.
Shahjalal Islami Bank posted a credit growth of 26.79 per cent against a deposit growth of 18.42 per cent as of January 19, that of National Bank 13.76 per cent against 5.79 per cent and that of EXIM Bank 12.09 per cent against 4.54 per cent.
As per BB rules, the conventional commercial banks are not allowed to invest more than 85 per cent of their deposits while Islamic banks and Islamic wings of the conventional commercial banks can invest up to 90 per cent of their deposits.
A BB official told New Age on Monday that some banks had taken an aggressive lending strategy.
The aggressive lending may put the financial health of the banks at risk if they continue with the strategy, he said.
The BB data showed that the year-on-year credit growth in the banking sector stood at 15.22 per cent against the deposit growth of 13.65 per cent. The BB official said that the credit growth in the banking sector was higher than that of the deposit growth due to an increased credit growth in 12 banks.

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