FBCCI offers recipe to tackle cash crunch

The country's apex trade body yesterday suggested banks reinvest their profits earned from the stockmarket to help tackle a severe liquidity crisis that is taking a toll on the banking sector and the overall economy.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) also said raising the lending rate following the recent withdrawal of ceiling by Bangladesh Bank (BB) and inflationary pressure have added further woes to the economy.
“Banks cannot settle LC (letter of credit) and reschedule loan. Many organisations are facing difficulties in paying salaries to their staffs,” FBCCI President AK Azad told reporters at a press conference at the Federation Building in Motijheel.
He also took a swipe at the banks and other financial institutions that made hefty profit -- Tk 8,000 crore -- from the stockmarket business, but are doing nothing for the small investors.
The FBCCI president gave a recipe that includes capping the lending rate, reviewing CRR (cash reserve requirement) and SLR (statutory liquidity ratio) hike, and stopping devaluation of the taka to help the economy overcome this critical juncture.
The apex trade body also diagnosed the reasons for the recent stockmarket debacle and blamed scanty supply against huge demand and rapid expansion of merchant banks and brokerage houses across the country, for the huge fall in stock prices.
“Every bank made profits from the capital market operation last year. Now they should come up to reinvest,” said Azad, also a director of a private commercial bank.
Saying that the financial institutions have made the profit legally, the FBCCI president called upon the government to bring back those institutions to reinvest in the stockmarket.
"The Bangladesh Bank (BB) as the regulator can take the lead along with the finance ministry, Securities and Exchange Commission and the stock exchanges," he told reporters.
The trade body also stressed offloading of shares by state-owned enterprises and multinational companies.
Azad urged the central bank to review the recent hike in CRR and SLR to address the ongoing liquidity crunch in the economy.
On the rising lending rate, he asked the BB to cap the ceiling for the sake of the economy.
“The gap between lending and cost of fund must not exceed 3 percent,” he said. Azad also urged the authorities to ask the banks to set their sectoral loan targets.
The FBCCI also expressed concern over the continued devaluation of the taka against the US dollar. Azad suggested some other foreign currencies could be considered for foreign exchange transactions instead of a single currency -- the US dollar.
Senior office bearers of the FBCCI were also present at the briefing.