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Bangladesh Bank (BB) is considering to exempt Probashi Kallyan Bank (PKB) from maintaining the Statutory Liquidity Ratio (SLR) as the central bank recently sought opinion from the government in this regard, officials said.
The central bank approved conversion of the state-run specialised bank, that started commercial operation recently, into a scheduled one on July 30, 2018 for expanding the business, they said.
"We've applied for the exemption and the central bank sent a letter to the financial institutions division (FID) of the finance ministry seeking opinion in this regard," Managing Director of PKB Mahatab Jabin told the FE.
"We've also requested the FID to consider our request. We're yet to get any decision, however."
She said the bank would face liquidity problem without the exemption and it would be tough for the bank operate the banking activities.
A senior official at the BB said the issue is waiting for the government approval.
The country's banks have been allowed to comply separately with the cash reserve requirement (CRR) and SLR rules since 2014 for facilitating implementation of the monetary policy effectively.
Under the existing rules, the conventional banks have to maintain daily 13 per cent of their average total demand and time liabilities as SLR while Islamic Shariah-based banks and Shariah-based banking wing of conventional banks at 5.5 per cent.
The eligible components for maintaining liquidity reserve are cash in tills (both local and foreign currency), gold, daily excess reserve (excess of cash reserve) maintained with the BB, balance maintained with the agent bank of BB and un-encumbered approved securities as defined in the Banking Companies Act.
Currently, Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB) enjoy complete exemption from maintaining SLR.
Meanwhile, the banks have to maintain 5.50 per cent CRR with the central bank from their total demand and time liabilities on a biweekly basis.
Besides, the banks are now allowed to maintain the reserve at 5.00 per cent on a daily basis, but the biweekly average has to be 5.50 per cent in the end.
The CRR will have to be maintained with local currency (Bangladesh taka) only.
The day-end balances of the current accounts maintained with different offices of the BB will be aggregated to compute the maintained cash reserve of the day.
The government has made applicable the bank company act-1991 in the power of Probashi Kallyan Bank Act 2010. For this, the Bank Company Act, 1991 and Probashi Kallyan Bank Act 2010 simultaneously applicable for operation of the bank, General Manager of Banking Regulation and Policy Department of BB Abu Farah Md. Naser said in the letter.
The PKB started journey in April 2011 with a paid-up capital of Tk 1.0 billion to provide collateral-free loans to overseas jobseekers and those returning home for their rehabilitation.
The BB is positive to consider exemption from maintenance of SLR provision as the specialised bank provides collateral-free loans to workers going abroad for employment, provide loan to returnees to help them out employment within the country, facilitate sending remittance and encourage the wage-earners to invest in the country, said a BB source.
The BB has recommended in the letter that exemption from maintenance of the SLR provision could be considered.
The SLR is an important instrument to combat the liquidity crisis in the banking sector and facilitate implementation the monetary policy, according to the BB.
Presently, the paid-up capital of the bank is Tk 4.0 billion. Of the volume, the Wage Earners' Welfare Board provided Tk 3.80 billion and finance ministry Tk 200 million to meet the total required paid-up capital of the PKB.
The outbound workers get maximum of Tk 200,000 as migration loan with 9.0 per cent interest rate while the rate is 11 per cent for the returnees.
The PKB data showed some 29,996 outbound workers received migration loans worth Tk 3.08 billion from 2011-12 to August 2018-19. During the period, the bank recovered Tk 2.31 billion.
Currently, PKB is running its business with 63 branches across the country.