Bangladesh Bank will not print money to provide fresh loans to National Bank, and the lender will instead have to borrow from other banks to meet depositors’ withdrawal demands, the central bank said on Thursday.
However, Bangladesh Bank will provide a guarantee for the loans that National Bank secures from other banks, according to central bank spokesperson Arif Hossain Khan.
He disclosed the information after a meeting between Bangladesh Bank Governor Mostaqur Rahman and National Bank Chairman Melita Mehjabin and Acting Managing Director Zahidul Haque on Thursday.
The meeting discussed measures to ensure that depositors can withdraw funds according to their needs.
During the meeting, the National Bank chairman briefed the governor on the bank’s recent situation.
She said governance at the bank had improved following various measures taken by Bangladesh Bank. Positive changes have also been made in the sponsor management to improve the bank’s efficiency and operational capacity, she said.
In response, Governor Mostaqur Rahman said Bangladesh Bank had recently taken note of National Bank’s liquidity situation and depositors’ demand for withdrawals.
Against this backdrop, the central bank has instructed the bank to take necessary measures to protect depositors’ interests, maintain public confidence in the banking system and ensure smooth banking operations.
The latest decision means National Bank will have to arrange liquidity through borrowing from other banks rather than receiving direct liquidity support created through money printing by Bangladesh Bank. The central bank’s guarantee is expected to facilitate such borrowing.
