BB to lift LC restrictions on crisis-hit banks

The Bangladesh Bank (BB) has decided in principle to withdraw the restrictions on opening letters of credit (LCs) by six crisis-hit banks, according to officials.

The measure, which was imposed in August this year, prevented banks from opening LCs only by keeping a 100 percent margin.

The development came following a meeting at the Bangladesh Bank headquarters yesterday between officials of the ailing banks and central bank officials.

Bangladesh Bank Governor Ahsan H Mansur presided over the meeting while Nurun Nahar, Md Habibur Rahman and Md Kabir Ahmed, deputy governors of the central bank, were also present.

The six banks also requested the central bank to quickly process liquidity support, which is being offered through inter-bank money market

On the other hand, the managing directors and chairmen of Bangladesh Commerce Bank, Padma Bank, Union Bank, Social Islami Bank, First Security Islami Bank, and ICB Islami Bank were present.

Contacted, Mohammad Forkanullah, managing director (acting) of Social Islami Bank, told The Daily Star that the governor responded positively to their request.

Forkanullah said the central bank invited them to learn about the latest developments, including loan recovery, deposit mobilisation and overall banking activities.

After the political changeover on August 5, all six lenders except Padma Bank saw their boards reconstituted.

Seeking anonymity, a senior central bank official also confirmed to The Daily Star that the governor had agreed to relax the restrictions.

The six banks also requested the central bank to quickly process liquidity support, which is being offered through the inter-bank money market.

They also urged the central bank to intervene and reduce the profit rates that they were being charged for availing liquidity support.

On condition of anonymity, the chairman of one of the crisis-hit banks told this newspaper that the ongoing process of providing liquidity support to them is not "well-designed".

"We need quick and accumulated liquidity support instead of getting it phase-by-phase to tackle the ongoing deposit withdrawal pressure."

The official added that the banks which are providing the support are exploiting their situation by imposing high profit rates.

In response, central bank officials said that the rate was determined by the market and that the regulator would not intervene in this regard.