Bangladesh Bank froze 760 million taka worth of funds of One Bank Ltd. and Premier Bank Ltd. for breaching the permissible limit for their advance-deposit ratios, or ADRs, and issued warnings to two other banks, The Daily Star reported Dec. 20, citing a central bank official.
The central bank on Dec. 17 blocked funds worth 510 million taka and 250 million taka, respectively, from the current accounts of One Bank and Premier Bank. The move prevents the two banks from using the blocked amount as part of the cash reserve ratio or earning interest on the sum.
Under the country's regulations conventional commercial banks cannot lend more than 85% of their deposits, but the central bank's data showed that in the second week of November, One Bank's ADR stood at 90% while Premier Bank's ratio was 88%.
Premier Bank's managing director, M. Reazul Karim, said the bank has taken measures to comply with regulations and he expects the ADR to meet required limits soon. His counterpart at One Bank, M. Fakhrul Alam, declined comment on the matter.
Meanwhile, the central bank asked Shariah-based lenders, Islami Bank Bangladesh Ltd. and Union Bank, to lower their ADRs to permissible levels by Dec. 31, or face a similar freezing of funds. While the ADRs of Islamic banks and Islamic wings of the conventional commercial banks are allowed a limit of 90%, the banks' ratios have breached this ceiling, The Daily Star noted.
Islami Bank Bangladesh Chairman Arastoo Khan said the bank has taken steps to reduce its ADR to permissible levels by the deadline.
The latest events come after the central bank sacked top executives at Farmers Bank Ltd. for failing to maintain regulatory rules to properly manage liquidity requirements.
As of Dec. 19, US$1 was equivalent to 82.72 Bangladeshi taka.