Ten of Bangladesh's banks have been diagnosed 'weak' and remedial action is underway to protect 'depositors' interests', according to a declaration made Thursday.
The central bank has decided their status as 'weak bank' as per four indicators -- their classified loans, capital adequacy, loan-deposit ratio, and the amount of provisioning.
"We've already started a discussion process on a one-to-one basis to solve the problems of the identified weak banks," Bangladesh Bank Governor Abdur Rouf Talukder told reporters, without mentioning the name of any bank.
Under the recovery package, the banks will have a three-year business plan the progress of which will be monitored by a senior official of the central bank.
The central bank has identified the weak banks to protect the depositors' interests, according to the governor.
He also exudes hopes that the country's volatile foreign-exchange market will be stable shortly thanks to a falling trend in import orders alongside higher inflow of remittances.
"We expect that the forex market will be stable within two months," the BB governor said to a query at a 'meet the press' programme.
He said the inter-bank exchange rate would be fixed in line with market requirement when the forex market returns to normal.
Currently, all the scheduled banks fix their exchange rates, including inter-bank ones, in line with the BB policy dictate.
"The exchange rates have been fixed on the basis of outflow and inflow of foreign currency, not the position on foreign-exchange reserves," the central bank chief explained.
The central bank is now working to reduce the gap between outflow and inflow of the foreign exchange, according to the governor.
In July 2022, the opening of letters of credit (LCs) came down to $6.0 billion from $8.0 billion a month before following close monitoring as well as other regulatory measures taken by the central bank to ease import-payment obligations on the economy as per a government-declared austerity course.
"The imports of luxurious items as well as car dropped drastically in July following such monitoring," he disclosed.
He also said the central bank continues to provide its foreign-currency support to banks for settling import payment obligations, particularly for essential items including fuel oils.
It sold $45 million more directly to different banks on Thursday to help them meet a growing demand for the greenback-as global price rises have led to import-cost escalation with its resultant pressures on reserves of Bangladesh, as also of many other countries.
On Wednesday, the central bank sold $40 million to two stated-owned commercial banks on the same grounds.
The BB has so far injected $1.35 billion from the reserves directly into commercial banks as liquidity support for import payments in the current fiscal year (FY), 2022-23.
In FY22, the central bank sold $7.62 billion from the reserves to the banks for the same purpose.
Banks are now facing liquidity 'crisis' and purchasing the greenback from the central bank continuously for settling their import payment bills, the BB chief added.
"Withdrawal of funds (local currency) amounting to over Tk 780 billion from the market in FY'22 through the selling of more than $7.50 billion to banks was the main reason for the liquidity crisis," he notes.
He also said discussion on lifting the lending cap will be ended after improving the liquidity situation in the banking system.
"We're now working to enhance money supply on the country's banking system," the governor said while replying to another query.
In Bangladesh, money supply in proportion to the gross domestic product (GDP) is around 43 per cent while 88 per cent in India, according to the BB governor.
"Definitely, our economy is now under pressure," Mr Talukder said while replying to another query.
He also said import-induced inflation is a big pressure on the economy.
A positive trend will be visible within next 2-3 months as both the government and the central bank are now working on the issue, he adds.
"We're now trying to contain the inflation through containing demand-side growth along with intervention in the supply side also," he explains.
The governor also said the central bank will provide policy supports continuously for development of the country's secondary bond market.
"The amount of classified loans in the banking sector will be reduced if the bond market develops," he notes.
Among others, deputy governors of the central bank Kazi Sayedur Rahman and Abu Farah Md. Nasser and chief economist Dr Md. Habibur Rahman also spoke at the press meet held at the central bank's headquarters in Dhaka.