Editorial
Credit disbursement suffers
Banks' profitability under strain
THE banking sector continues to suffer a mismatch between deposits to credit ratio. Over a twelve month period, deposits have risen by nearly 18 per cent compared to about 9.4 per cent growth in credit or loan disbursements. The scenario is hardly conducive to profitability of banks. A surge in deposits on which banks have been unable to make productive investments is causing a rise in cost of funds. Ever since the share market debacle and falling rates of interest on other savings instruments, investors have turned to banks as safe havens for investment.
What has prompted banks to give competitive interest rates a year ago has turned into a bane since industrial credit has fallen drastically. The fallout from politics of violence that arrived on the national stage since January has already cost the country 17 days in hartal accompanied largely by acts of arson and damage to public and private property. With uncertainly looming large on the political horizon, it is little wonder that investors' confidence has dipped to an all time low. Production-related investments have fallen due to actual and potential threats that confrontational politics cause. Credit flow has also seen curtailing with new regulations coming into effect after the recent banking scams involving Hall-Mark and Destiny group.
The result of all this mayhem is that banks are now sitting on an excess liquidity of Tk72,000crore as of May, 2013. Unless there is fundamental change in the way national politics is conducted, we see no change in the fate of the banking sector.
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