Nine banks are currently operating with a combined negative current account balance of Tk 18,165 crore with the Bangladesh Bank, which means they are relying entirely on lifelines provided by the central bank to remain afloat.
The central bank creates new money when it lends to commercial banks, a process informally known as 鈥榩rinting money鈥�.
BB spokesperson and executive director Husne Ara Shikha disclosed the situation on Sunday, highlighting the critical financial state of these banks.
According to BB data, First Security Islami Bank has the highest negative balance of Tk聽7,269 crore, followed by Social Islami Bank Tk聽3,394 crore, National Bank Tk聽2,342 crore, Union Bank Tk聽2,209 crore, Islami Bank Tk聽2,201 crore, Bangladesh Commerce Bank Tk聽380 crore, Padma Bank Tk聽234 crore, ICB Islami Bank Tk聽95.8 crore and Global Islami Bank Tk聽39.39 crore.
The banks, except Padma Bank and ICB Islami Bank, were previously under the control of S Alam Group.
Until June, only six banks had negative balances, but the problem has since spread to the others.
BB officials said that S Alam Group withdrew about Tk聽2 lakh crore from the banking system violating rules, especially from those banks it had controlled.
Experts have raised concerns about the BB鈥檚 ongoing support, citing potential harm to the financial market.
A bank鈥檚 current account with the central bank is used to meet cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements, and to facilitate clearing and settlement between banks.
If a bank鈥檚 account lacks sufficient funds, the central bank cannot process transactions, leading to operational disruptions.
Due to rampant loan irregularities, mismanagement and a lack of governance in the banking sector during the recently ousted Awami League regime, these banks suffered a significant losses of depositor confidence, resulting in a severe cash crisis.
Since December 2022, the central bank has been bailing out these troubled banks without addressing the root causes of their distress, putting the country鈥檚 overall financial stability at risk.
Usually the BB lends to commercial banks against securities like treasury bills and bonds.
However, these banks lack the necessary collateral, leaving the BB with no standard lending instruments.
The latest loans were extended solely based on promissory notes, underscoring the precarious nature of the arrangement.
Islamic banks are required to maintain a minimum CRR of 4 per cent and an SLR of 5.5 per cent of deposits.
Banks failing to meet these requirements face daily fines of 3.5 per cent for CRR shortfalls and 5 per cent every two weeks, with additional penalties under a special repo rate (currently 9.5 per cent) for SLR deficiencies.
These fines accumulate daily, compounding the banks鈥� financial strain.
On December 26, 2023, the BB provided Tk 22,000 crore in loans to seven crisis-hit banks under a special arrangement to temporarily cover CRR and SLR shortfalls and improve their year-end balance sheets.
However, after repaying the loans to the BB, these banks quickly fell back into crisis, highlighting the unsustainable nature of these bailouts and the ongoing vulnerabilities in the sector, BB officials said.