Deposits in banks are increasing and money outside the banking sector has decreased by Tk 45,000 crore in recent times, reflecting growing confidence in the banking sector, Bangladesh Bank (BB) Governor Ahsan H Mansur said yesterday.

"The good thing is that some money is coming back [into the banking sector]. Now we can assure customers that they will get their money back," he said at a roundtable, titled "Current Business Challenges and the Way Forward", organised by The Daily Star at its office.

He made the comments in response to top bankers expressing concerns about the challenge of restoring people's confidence in the banking sector, which was plagued by irregularities and build-up of toxic loans in the face of weak governance during the 15-year tenure of the Sheikh Hasina-led Awami League government.

Mansur, a former economist at the International Monetary Fund (IMF), took charge of the central bank in mid-August after former governor Abdur Rouf Talukder resigned following the previous government's ouster on August 5.

Since then, the new central bank governor has taken several steps, including reconstituting the boards of 11 banks, six of which were controlled by the controversial S Alam Group, as part of efforts to restore discipline to the beleaguered sector and win back the people's trust.

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Around Tk 290,000 crore is outside the banking sector at present, which would go a long way to improving the situation of cash-strapped banks.

Mashrur Arefin, managing director of City Bank PLC, said liquidity shortages are among the major problems affecting the banking sector at present.

He said that money outside banks amounted to Tk 184,000 crore in 2021, adding that the recent spike means that people have lost confidence in the banking system.

"This is not helping us," he lamented.

Central bank data showed that currency outside banks stood at Tk 290,436 crore till June this year, down from Tk 291,913 crore a year ago. Currency outside banks was at Tk 236,448 crore till June of 2022 and Tk 209,517 crore in 2021.

Ali Reza Iftekhar, managing director of Eastern Bank PLC, requested the governor to force troubled banks to go for the issuance of right shares since they do not have any money.

"For instance, a cheque worth Tk 5 lakh bounced at a bank," he said without naming the bank.

We want to operate in the interbank market with a guarantee from the central bank but if they default then we will have to go to the central bank to encash the guarantee, he pointed out.

"Those ailing banks need to generate cash."

The banker urged the interim government to revisit the Bank Companies Act, which was amended earlier this year, and also said the central bank's definition of business groups needs to be revisited.

Selim RF Hussain, managing director of BRAC Bank, said there is a black economy in our country.

Hussain, also the chairman of the Association of Bankers, Bangladesh (ABB), added that all processes had been digitalised in neighbouring India. As such, he suggested full digitalisation of the central bank.

To reduce rent-seeking and raise government revenues, he added that the revenue administration should also be digitalised.

Hussain also emphasised the need to tackle the hundi system, which is an informal way of transferring money from one country to another. He said around 60 percent of remittances come through the informal system.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said the regulatory body was not empowered under the previous government.

He added that the regulator often patronised defaulters that had wreaked havoc on the system.

"In 2017, we saw banks being taken over illegally," the senior banker said, adding that they want to see the central bank properly fulfil its role as a regulator.

To this end, strengthening the central bank is vital, he added.

"We have seen that some banks have been supported with cash. That should not happen," Mahbubur added.

However, Mansur said the central bank is not injecting US dollars into banks now.

Speaking about the country's economy, Mansur warned that the balance of payments, cash flow and dollar flow would be impacted if the volume of exports falls.

"So, we need to help export-oriented sectors. But we are not considering giving incentives or this or that. I don't believe that giving export incentives itself is the solution."