Five banks sign deal with BB to borrow funds from stronger banks

As many as five banks hamstrung by a severe liquidity crunch have struck an agreement with the Bangladesh Bank (BB) to borrow funds from stronger banks through interbank transactions.

The deal was finalised on Sunday between the central bank and the five banks, said Husne Ara Shikha, spokesperson for the central bank.

The banks involved are National Bank, Social Islami Bank, First Security Islami Bank, Union Bank, and Global Islami Bank.

The Bangladesh Bank will act as a guarantor for these loans.

Although the central bank will charge a small commission for this service, it may create an opportunity for the struggling banks to recover from their current dire situation.

Before the fall of the Sheikh Hasina government, these banks were under the control of the controversial S Alam Group.

After the change in government, their boards were dissolved, and new directors were appointed.

As part of efforts to stabilise these banks, Bangladesh Bank Governor Ahsan H Mansur proposed liquidity support through interbank transactions.

The banks will now seek financial assistance from more stable banks, with central bank approval needed for any borrowed funds.

Shikha said, "The agreement has been signed, but the exact timing of the liquidity support is still uncertain. The assistance will be provided once the banks agree to lend the funds."