Muhammad Ayub Ali :
The Bangladesh Bank has imposed restrictions on the amount banks can lend against their deposits. However, updated data from the central bank reveals that a total of 16 banks exceeded this limit when distributing loans in December.
Among these banks, 12 are publicly listed and are also grappling with a liquidity crisis following the departure of the previous government. The banking sector is currently facing significant financial challenges, with some institutions experiencing severe difficulties due to mismanagement and financial irregularities.
As per the central bank’s regulations, the Advance Deposit Ratio (ADR) -also known as the loan-deposit ratio – is set at 87 per cent for conventional banks and 92 per cent for banks operating under Islamic Sharia principles. This means that conventional banks can lend up to Tk 87 for every Tk 100 in deposits, while Sharia-compliant banks can lend or invest up to Tk 92.
Despite these allowances, 12 banks breached the prescribed limit, including AB Bank, Exim Bank, First Security Islami Bank, Global Islami Bank, Islami Bank Bangladesh, IFIC Bank, National Bank, Premier Bank, Standard Bank, Social Islami Bank, United Commercial Bank, and Union Bank.
Among the conventional banks, National Bank recorded the highest violation, with an ADR of 113.56 per cent, followed by AB Bank at 98.54 per cent. Other banks exceeding the limit include IFIC Bank – 91.34 per cent, United Commercial Bank – 91.39 per cent, Premier Bank – 87.37 per cent.
For Islamic Sharia-based banks, First Security Islami Bank had the highest ADR breach at 128.53 per cent, followed by Social Islami Bank at 115.63 per cent. Other violations include Union Bank – 115.63 per cent, Exim Bank – 110.68 per cent, Global Islami Bank – 106.71 per cent, Islami Bank Bangladesh – 93.37 per cent, Standard Bank – 95.14 per cent, AB Bank’s Islamic branch – 112.31 per cent.
Economist Dr Moinul Islam told The New Nation that exceeding the ADR is highly risky, especially for depositors. He urged the central bank to take strict action against banks that surpass the 100 per cent ADR threshold. To restore public confidence and prevent financial instability, he emphasised the need for stronger enforcement of banking regulations by the central bank.
Banking experts have warned that the ADR limits set by Bangladesh Bank adhere to global standards and should not be exceeded, as doing so could pose significant risks to the sector. Depositors, in particular, may face difficulties in retrieving their funds, with some financial institutions already struggling to return money to customers.
