<div style="text-align: justify; "><b style="font-size: 1rem;">Some private sector banks are in deep crisis because of lack of adequate liquidity and are being forced to borrow money from state-owned Sonali Bank at a 9 percent interest rate to stay afloat.</b><br></div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Islami Bank, Al-Arafah Islami Bank and National Bank are borrowing money from Sonali Bank at a 9 percent interest rate, which is the highest commercial lending rate at present.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Economists and banking sector insiders say that it means the sector is passing through a hard time due to higher non-performing loans, lack of good governance and serious corruption in the management of the respective banks.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">They say at present the call money rate is between 6-7 percent while banks are borrowing at 9 percent rate, which proves the crisis has mounted in these banks. They also say the troubled banks have no other options, but to borrow money.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Both such borrowing and lending are very risky considering the ability of investment of these banks, they say.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Also read: 5 held for spreading rumors on social media about Islami Bank, S Alam group</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">BRAC Bank Chairman Dr Ahsan H Mansur told UNB that some banks have lost their customers’ trust due to their mismanagement.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">“As a result, people have withdrawn money from those banks,” he said.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Giving an example he said that the deposit of BRAC Bank increased by 33 percent in the last quarter while the deposit volumes of many banks decreased.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Usually, banks charge a higher interest rate to lend to other banks while considering it risky, he said.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">On 13 December 2022, the Sonali Bank’s Board of Directors approved the investment of Tk200 crore in fund placement in favour of Islami Bank Bangladesh Limited and Tk75 crore in favour of Al-Arafah Islami Bank Limited at a 9 percent lending rate for a period of 90 days.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Also read: Scam-hit Islami Bank earns operational profit in 2022, Basic Bank reports loss</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">On the same day, the bank's Board also agreed to the proposal to extend the term of the Tk150 crore loans to National Bank for another six months at 9 percent interest subject to payment of the previous interest.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">It is a normal practice that when a bank faces a liquidity crisis it borrows from another bank via the interbank money market.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">But the liquidity situation in three private sector banks is so critical that they are forced to borrow from another bank at the highest commercial lending rate.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">According to the Bangladesh Bank's guidelines, banks can charge a maximum of 9 percent interest on all types of loans other than consumer loans such as auto loans and personal loans, in which case the highest lending rate ceiling is 12 percent.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Professor Dr Abul Barakat told UNB that any short-term borrowing at such a rate is not harmful, but it could create trouble while getting such loans will be lingering.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">He said banks sometimes face a liquidity crisis, then it is required to borrow to meet the instant crisis. But a 9 percent lending rate for banks is high.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">“Then how much a bank would have to charge against any commercial loans,” he asked.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Sector insiders say corruption and lack of good governance are the main reasons behind such a crisis.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Some questioned the role and the ability of the central bank to regulate commercial banks that fail to check corruption. UNB</div><div style="text-align: justify;"><br></div><div style="text-align: justify; ">bnbd24/kh</div>