The governor of Bangladesh Bank, Ahsan H Mansur, has taken a firm stance against weak banks and declared that they will no longer provide cash support to them by printing money.
“Sudden closure of banks or printing money for them would not lead to a solution,” he argued while speaking to the media after a meeting with business leaders at Bangladesh Bank on Tuesday.
The governor also ruled out the speculation that the Tk 1,000 banknotes might be withdrawn and clarified that they have no such plans. He also urged everyone to refrain from spreading rumours in this regard.
However, the banking sector regulator is considering dissolving the boards of fragile banks, he added.
In response to a query over the central bank’s plan regarding weak banks, the governor also said they would follow a different strategy to salvage the banks. Initiatives have already been taken to prevent the accused from pulling out money.
If everything goes well, inflation will come down to a good level within seven to eight months. It is expected to decline to 5 to 6 per centAhsan H Mansur
“Once a banking commission is formed, there should be measures to bring down the number of weak banks as well as to merge them, in an effort to reach a solution. However, there will not be any solution by closing banks or printing money,” he explained.
When a journalist drew the governor’s attention to the excessive withdrawal of money from the Shariah-based banks, he said, “It is a sovereign right of depositors to withdraw their money. The depositors, if they feel insecure, will withdraw their money, and the government will not intervene here.”
Arguing in favour of this stance, he said, “A bank cannot run if the depositors do not have faith in the management. It is not always right to step out to buoy such banks. The management of particular banks is responsible for the situation, as they themselves led the banks to this point. Therefore, we will not provide any assistance to them.”
The Bangladesh Bank is taking time to ensure that the right decision is made over the Shariah-based banks. It is not doing anything hastily that would bring them overnight popularity
Mahbubul Alam, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), led the delegation of businessmen, which included former FBCCI president and BNP vice-chairman Abdul Awal Mintoo, BKMEA president Mohammad Hatem, and MCCI president Kamran T Rahman, among others.
Responsible individuals to be held accountable
The governor briefed the media that the businessmen expressed concerns over the banking sector, particularly regarding the Shariah-based banks. “Here, we (Bangladesh Bank) are taking time to ensure that the right decision is made. We are not doing anything hastily that would bring us overnight popularity.”
He continued, “Whatever we do, (it is certain that) the responsible ones will be held, instead of targeting any particular business entities. We have assured the businessmen in this regard. If officials from any institutions are found responsible, they will face action, no matter if they are from Bangladesh Bank.”
Ahsan H Mansur revealed that an announcement is likely in one or two weeks regarding the formation of a banking commission. “We are working to facilitate a sustainable solution for the weak banks. It is too tough to solve the issues in the banks without identifying the responsible ones and ascertaining the extent.”
Inflation to come down
In response to businessmen’s concerns over inflation, the central bank governor said, “The current monetary policy is working properly. It will be tightened further, though not to a significant extent. If everything goes well, inflation will come down to a good level within seven to eight months. It is expected to decline to 5 to 6 per cent.”
Detailing their plan, Ahsan H Mansur said the central bank’s policy towards inflation is a consistent hike in interest rates. “We are maintaining the policy. Besides, as the currency exchange rates have now been stable, it will help bring down inflation.”