Published: 01:25 AM, 24 November 2025
Commercial banks hold back borrowing trend from BB
Following an escalation, commercial banks' borrowing from Bangladesh Bank (BB) decreased remarkably in recent months due mainly to shrinking investment avenues amid persisting overall economic sluggishness. Financial sector officials and money market experts said banks' funding appetite keeps declining since the yields in government securities, the only investment avenue amid the existing economic slowdown where the lenders feel some sorts of comfort because of the higher bets, declines on a noteworthy scale. At the same time the Bangladesh Bank (BB), the country's central bank, has so far purchased $2126 million from the banks since July 13 last and injected around Tk 259 billion in exchange to the market to keep the exchange rate stable, which also played a key role in lessening banks' borrowings using BB's liquidity-feeding instruments like central bank repo and special liquidity backups. The central bank repo and special liquidity facility are the two major instruments through which the commercial lenders used to borrow a significant volume of funds from the banking regulator to meet their regular liquidity demands.
In terms of the central bank's updated data, the scheduled banks altogether borrowed Tk 1.55 trillion in July last using central bank repo. Since then, the figure kept dropping to record Tk 1.09 trillion, Tk 996 billion and Tk 616 billion in August, September and October respectively. At the same time the special liquidity facility under which there is seven borrowing windows like ALS (assured liquidity support), AR (assured repo) and IBLF (Islami Banks Liquidity Facility), the banks overall borrowed Tk 1.43 trillion using the facility from the central bank in July last. The monthly-borrowing volume declined to Tk 1.18 trillion, Tk 603 billion and Tk 396 billion in August, September and October respectively. Bangladesh Bank's Executive Director Dr. Md. Ezazul Islam said the current situation in banks indicates that the contractionary monetary stance of the regulator to contain inflation starts transmitting to the market. He said the private sector credit growth dropped to a historical low of 6.29 per cent while the deposit growth increased to over 10 per cent.
It signals that the bank has surplus liquidity but not enough investment avenues under the economic slowdown. In fact, there are banks who feel comfort to park their surplus credits into the state-guaranteed standing deposit facility (SDF) even a 50-basis-pont cut in the SDF rate to 8.0 per cent. Dr. Islam, who leads the monetary policy department of the central bank, said the commercial banks were observed borrowing heavily from the BB and invest in G-sec to make hefty gains even few months ago when the yields in treasury bills and bonds over 12 per cent. "In October, it dropped below or just over 10 per cent. So, the borrowing of fund from BB at 10 per cent and invest in G-sec is no longer suitable for them," he added.
Managing director and Chief Executive Officer of Mutual Trust Bank (MTB) PLC Syed Mahbubur Rahman said the investment avenues for banks keep shrinking because of the current macroeconomic situation. On the other hand, the banking regulator injected a good volume of liquid funds into the market through buying over 2.0 billion dollars from banks in recent months as part of its foreign exchnage market intervention to keep exchange rate stable.
"This is one of the major reasons behind the downtrend in borrowing demand among scheduled banks from the BB," the experienced banker said. Managing director of Shahjalal Islami Bank PLC Mosleh Uddin Ahmed said the credit demand from the private sector dropped remarkably in recent months while banks seem to be very cautious to investment to maintain a sound year-end balance-sheet under this challenging period of time. The veteran banker said the country needs to vibrate its economic activities somehow with creating an investment-friendly climate for both scheduled banks and the country's private industries.
