Currently, the main challenges include controlling inflation and achieving economic growth. It is crucial to continue providing credit to productive and investment-friendly sectors. Closely monitoring the market is imperative.
An increase in the value of the dollar and higher fund costs may impact banks' profits. The global rise in interest rates and the depreciation of the local currency against the US dollar lead to increased payments for those with foreign loans. Additionally, the Bangladesh Bank's policy interest rate hike raises the funding cost of domestic debt. The quarterly (July-September) report on currencies and currency exchange rates published by Bangladesh Bank predicts these challenges. The report notes that despite global economic recovery post-corona, the Russia-Ukraine war in early 2022 caused global uncertainty and high inflation. Consequently, central banks, including the United States, adopted contractionary monetary policies, ongoing challenges that affect Bangladesh's banking and financial sector. The report also warns that Bangladesh Bank's dollar sales in the foreign exchange market to stabilize the exchange rate may pressure the banking sector's liquidity, necessitating careful management. Inflation control is identified as a major challenge, emphasizing the need to achieve desired economic growth while maintaining tolerable inflation. The central bank must take various measures toward contraction while continuing to provide necessary credit to productive and investment-friendly sectors. The government, by closely monitoring the market and simplifying the import process for daily necessities, can play a significant role in controlling inflation. The report also acknowledges the supportive role of the contractionary monetary policy and ongoing fiscal policy steps. While the rate of non-performing loans has slightly decreased, the continuous increase in their amount suggests a need for closer monitoring of banks and financial institutions. The report highlights the importance of the bond market in long-term investment and economic development but notes its limited development in the country. Non-bank financial institutions are encouraged to reduce dependence on inter-bank transactions and collect long-term funds from bonds. As of September 2023, real foreign assets decreased due to a deficit in the financial account. The adoption of contractionary monetary policy and liquidity pressure has led to a decrease in credit growth in the private sector. Regarding liquidity, the excess liquidity of banks decreased to 1 lakh 64 thousand 440 crore rupees at the end of September, further decreasing to 1 lakh 59 thousand 392 crore rupees in October. During July-September, the central bank provided more liquidity support to banks, particularly Islamic banks, as they faced liquidity crises due to various irregularities. Bangladesh Bank is lending money to these banks without collateral.