Put together a couple of news reports, published in two financial dailies with a gap of a single day, did highlight the high level of erosion in cash liquidity in the country's banking sector and a possible solution, albeit partial, to the crisis.
A Bangla business daily quoting a central bank publication said the cash liquidity in the country's banking sector declined to 19.86 per cent at the end of the year 2017, the lowest level in two decades.
The erosion in liquidity was experienced by all categories of bank---state-owned, private and foreign. However, the private banks had the lowest level of cash liquidity.
That the situation did not improve in the banking sector in 2018 and the first half of the current calendar year was evident from the rising deposit rates and strong competition among banks to attract both government and private deposits.
Another report published in this paper said the government might allow all commercial banks to receive 'challans', an instrument used to deposit all charges, fees, taxes etc., belonging to it.
The Bangladesh Bank (BB) and the Sonali Bank, the largest state bank, have been receiving all the government money since the country became independent. It would be a notable departure from the decades-old system as far as the deposit of money of public exchequer is concerned.
If implemented, the decision would help the banks barring the Bangladesh Bank and the Sonali Bank raise their income and mobilise a greater volume of deposit.
For instance, in the financial year 2018-19, the Sonali Bank alone earned Tk 24 billion as commission on all treasury deposits. The amount is likely to be higher in the case of the central bank.
The volume of money transacted annually through treasury challans is over 4.34 trillion, the FE report said.
A finance division official reportedly claimed that the government would receive funds deposited through treasury challans almost instantly when all banks would be involved in the system. He said now it takes two to three days to receive funds from the BB and Sonali.
Bankers have welcomed the government's initiative on treasury challans, hoping that this would help them enhance income and get investible funds, which are scanty these days.
Besides, people seeking to deposit money through treasury challans would be relieved of hassles they face while submitting the instruments to the BB and the Sonali Bank. The government has a plan to extend the challan submission facility up to union level in keeping with its expanding service delivery.
But the reaction that came from the top official of the Sonali Bank to the government move appeared rather strange. He said he was happy with the decision as it would help the Sonali Bank to concentrate more on other services.
The Sonali Bank barring in areas where the BB has branch offices enjoys monopoly in taking government deposits through treasury challans. The bank in the event of implementation of the proposed move is likely to lose a substantial part of its income earned as commission.
The Bank, which has high level non-performing loans (NPLs), almost regularly seek from the government the capital replenishment. The problem of the banks would be compounded further following implementation of the government decision to decentralise the deposit of government fees, charges and taxes through treasury challans.
However, the proposed move is unlikely to offer any major solution to the liquidity crisis that the banks are facing. Nor would it help them much to raise the level of their investible funds. The funds that the bank would be receiving through deposit of challans would be very short-term in nature. Yet the banks will be able to use the fund for a very brief period unless the government decides otherwise.
Understandably, the government move to allow all the commercial banks to receive its money through treasury challans is deliberate. The moot issue is it wants to help the banks in a difficult time as far as liquidity is concerned. However, what the government would expect from banks, in exchange, is yet to be spelt out.
But banking experts are not much hopeful about any turnaround of the banking industry without striking at the root of all evil--- the ballooning NPL. The size of NPL has already crossed the trillion taka mark.
Despite demand coming from banking experts and relevant others to address the NPL issue seriously, banks and their regulator, seemingly, are inclined to going slow on this issue. Rather some of their moves have all the potential of encouraging the default culture. Any serious move to address the NPL issue would hurt the interest of many, including a section of sponsors of banks and delinquent borrowers having strong links with the power-that-be.