The amount of deposits in the country’s non-bank financial institutions dropped by Tk 380 crore in the April-June quarter amid the outbreak of COVID-19.
Officials of NBFIs said that the banks’ fund withdrawal from the NBFIs amid the coronavirus outbreak and the public distrust in the entities had resulted in a fall in the amount of deposits in the NBFIs.
As per Bangladesh Bank data, the amount of deposits in the NBFIs dropped to Tk 43,264.29 crore at the of June this year from Tk 43,644.12 crore at the end of March this year after making an improvement in the January-March quarter.
In 2019, the amount of deposits in the NBFIs dropped to Tk 43,121 crore from Tk 45,549 crore at the end of the year 2018.
The withdrawal of funds by banks resulted in a liquidity shortage in the NBFIs that prompted them to seek regulatory support to get rid of the situation.
IIDFC managing director Golam Sarwar Bhuiyan told New Age, ‘The situation has changed in the last few months with the ease in banks’ pressure to withdraw funds from NBFIs.’
As the credit demand has remained subdued due to the dismal business and economic outlook with the country making preparations to tackle a possible second wave of coronavirus outbreak, the NBFIs’ demand for fresh funds has also dropped, Golam Sarwar said.
‘We are still in need for fund to lower the cost of fund but not to tackle liquidity crisis,’ he said, adding that it would not be possible for the NBFIs to remain competitive given the falling lending rate in the banks.
To remain competitive, the NBFIs are trying to replace the costly funds with low-cost ones, Golam Sarwar said.
Earlier at a press briefing on July 14, the Bangladesh Leasing and Finance Companies Association, a platform of the NBFIs, urged banks not to withdraw deposits from the entities as such moves by the banks amid the coronavirus outbreak were resulting in a liquidity crisis in the sector.
At the meeting, BLFCA chairman Mominul Islam, also the managing director and CEO of IPDC Finance, urged the central bank to support the sector to tackle the risk.
Following the request, the central bank on July 21 reduced the cash reserve ratio for the country’s NBFIs by one percentage points.
The BB allowed the NBFIs to keep 1.5 per cent cash reserve ratio on bi-weekly basis and at least 1 per cent daily against term liabilities.
The policy relaxation allowed the NBFIs to utilise around Tk 350 crore, kept as CRR with the BB, for income generation purposes and to get rid of the liquidity shortage.
Although the overall liquidity situation improved in the last couple of months for majority of the NBFIs in line with the improvements in the banking sector, several NBFIs are still going through an intense liquidity crisis situation, said NBFI officials.
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