Summary:
- Janata Bank has requested Tk10,000 crore in liquidity support from Bangladesh Bank to stabilize its cash flow and address withdrawal pressures.
- The bank is grappling with a 61% loan default rate, a Tk33,921 crore capital shortfall, and daily borrowing needs of Tk18,000-20,000 crore for operations.
- Irregular loan distribution and 55% of loans concentrated in 10 industrial groups have worsened the financial crisis.
- Bangladesh Bank is reviewing the request while balancing inflation concerns after providing Tk22,500 crore support to other troubled banks in November.
State-owned Janata Bank has formally requested a substantial liquidity support package of Tk10,000 crore from the Bangladesh Bank to address its worsening financial crisis. The bank’s managing director, Md Mazibur Rahman, confirmed that a letter was sent to the central bank seeking a five-year loan at a 4% interest rate. He emphasized that the assistance is critical to improving the bank’s liquidity position and stabilizing its operations amidst mounting withdrawal pressures.
“If we receive this amount, our liquidity situation will improve,” Rahman stated, adding that the request is aimed at preempting potential complications caused by increased withdrawals. Rahman, who recently assumed the role of managing director, highlighted the urgency of the situation, citing customers’ growing concerns over the bank’s financial health.
Janata Bank’s financial troubles stem largely from irregular loan distributions and a high concentration of loans among a few influential borrowers. According to internal figures, 55% of the bank’s loans are concentrated in just 10 industrial groups, many of which have failed to repay on time. This has exacerbated the liquidity crisis, forcing the bank to borrow Tk18,000-20,000 crore daily for its regular operations. As of September 2024, Janata Bank reported a staggering 61% default rate on its loans, amounting to Tk60,489 crore, and posted a net loss of Tk1,504 crore. The capital shortfall now stands at Tk33,921 crore, underscoring the severity of its financial challenges.
The central bank has acknowledged receipt of Janata Bank’s request but has yet to make a final decision. A senior official from Bangladesh Bank confirmed that they are reviewing the situation carefully. This request comes in the wake of earlier interventions by the central bank to support other struggling financial institutions. In November 2024, Bangladesh Bank provided Tk22,500 crore in liquidity support to six crisis-hit banks, including National Bank and Social Islami Bank. However, these measures have raised concerns about inflationary pressures as money continues to be injected into the market.
Adding to the complexity of Janata Bank’s predicament is a statement from its chairman, Fazlur Rahman, who described the current situation as unprecedented in the institution’s history. “Such a fragile situation has never been faced in the history of Janata Bank. The bank is now in a deep crisis,” he wrote in a recent letter to government authorities.
The liquidity crisis at Janata Bank reflects broader vulnerabilities within Bangladesh’s banking sector. Other institutions like Padma Bank have also sought central bank assistance recently—Padma requested Tk1,300 crore to return customer deposits. These developments highlight systemic issues such as poor governance and concentrated lending practices that have left several banks exposed to significant risks.
The central bank has reiterated its commitment to safeguarding depositors’ money while maintaining tight monetary policies to prevent inflation spikes. Bangladesh Bank Governor Ahsan H Mansur assured depositors that their funds are safe and urged against panic withdrawals. At the same time, he emphasized that any liquidity support provided would be carefully managed through bonds and other instruments to mitigate inflationary risks.
As Janata Bank awaits a decision on its request for Tk10,000 crore in liquidity support, stakeholders across Bangladesh’s financial sector will be closely monitoring how this crisis unfolds and what it signals for the stability of the country’s banking system.
Source: TBS News
