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Higher than targeted private sector credit growth compared to deposits is believed to be the key reason for exceeding the advances-deposits ratio (ADR) by private banks.
This was revealed in a study presented at a seminar in the city on Saturday.
The report said increased investment in fixed income securities -- national savings tools -- is another reason for the recent overshoot of the ADR.
Abdul Kader Joaddar, deputy managing director of BRAC Bank Ltd, presented the paper on 'prevailing money market situation and the way forward' at the Institute of Chartered Accountants of Bangladesh (ICAB).
The ICAB, a national professional accounting organisation in the country, organised the event.
Dr Mustafizur Rahman, distinguished fellow of the leading local think tank Centre for Policy Dialogue (CPD), was present there as the chief guest.
ICAB president Dewan Nurul Islam delivered an address of welcome at the event moderated by ICAB vice-president Mahmudul Hasan Khusru.
"The private sector credit growth was 19 per cent at a time when the deposit growth was just 10 per cent," said Mr Joaddar.
He said Tk 100 billion annual investments in the savings certificates account for 5.0 per cent of advances-deposits ratio for the entire banking system.
Mr Joaddar said the current account deficit is putting pressure on the local currency liquidity as well as foreign exchange rates.
Citing higher non-performing loans (NPLs), he said the NPLs have posed a threat to banks' solvency at a time when many are struggling to meet the BASEL-III requirements.
Mr Joaddar, however, suggested the strengthening of governance and compliances in the banking industry with "zero tolerance" to regulatory compliances by banks.
Dr Mustafizur Rahman said the CPD has long been arguing for an independent banking commission to address irregularities in the sector.
He said the banking sector is performing so poorly in terms of NPLs and other indicators at a time when Bangladesh is graduating to a middle-income country.
"We expect that our banking sector should be competitive right this time. But what are we actually seeing?" Dr Rahman said.
The CPD distinguished fellow said a large part of imports may be genuine but those with zero tariff rate may be in question.
Dr Rahman said this as the moderator asked him as to whether the growing imports mean capital flight.
He urged the central bank and other relevant agencies to investigate this matter and take necessary action.
ICAB president Dewan Nurul Islam said the banking sector is in a state of disorder now.
Quoting a report of Bangladesh Bank, he said state-owned banks and other financial institutions have failed to meet the BASEL-III requirements.
The BASEL-III requires a maintaining capital to risk weighted asset ratio of 10 per cent, Mr Islam added.
The ICAB chief said banks did not face any major liquidity shortage in the early months of 2017.
"In fact, a build-up of excess liquidity in the banking sector was rather an issue to handle," he stated.
Mr Islam said a sudden shift from excess liquidity to liquidity crunch in the money market triggered a question: "Where has the money actually gone?"