The overall excess liquidity with the country's banks shrank by nearly 18 per cent or Tk 154.61 billion by January, mainly for a lending binge against a deposit dearth.
Selling the US dollar by the central bank also contributed to the trimming of their excess liquidity, officials said, as experts forewarned of slower economic activity for possible financing crunch.
The excess liquidity came down to Tk 712.36 billion in January last from Tk 866.96 billion a month before, according to latest statistics of Bangladesh Bank (BB).
It was Tk 921.64 billion in September last calendar year.
A major portion of the excess liquidity has already been invested in government-approved securities and BB bills as a risk-free investment for the banks, they added.
On the other hand, excess reserves, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, rose to around Tk 47 billion in January 2018 from Tk 46 billion in December 2017, according to the BB officials.
"Excess liquidity may rise in the coming months as the central bank has already taken different measures, including revised advance-deposit ratio (ADR) limit," a senior BB official said.
Meanwhile, the private sector credit growth swelled further in January due to higher trade financing for settling the import-payment obligations particularly for food grains, fuel oils and capital machinery, according to bankers.
The growth in credit to the private sector came to 18.36 per cent in January 2018 on a year-on-year basis from 18.10 per cent a month before, the latest BB data showed.
Besides, implementation of different infrastructure projects along with the mega ones has pushed up the overall private sector credit growth, they added.
Currently, the government is implementing nine big projects, including Padma Bridge, under the Fast Track Project Monitoring Committee, headed by Prime Minister Sheikh Hasina.
The total outstanding loans with the private sector rose to Tk 8,514.15 billion in January last from Tk 8,460.87 billion in December 2017. It was Tk 7,193.53 billion in January 2017.
The senior bankers, however, said the private-sector credit growth may decrease slightly in the coming months ahead of the national budget for the fiscal year (FY) 2018-19.
Also, they predict, unavailability of funds may push down the private sector credit growth in the near future.
Talking to the FE, Syed Mahbubur Rahman, Chairman of the Association of Bankers, Bangladesh (ABB) and Managing Director (MD) and Chief Executive Officer (CEO) of Dhaka Bank Limited, said the banks are now lending on selective basis, not approving fresh loans. As a consequence, overall economic growth might get slowed.
"Most of the banks are now sanctioning loans cautiously to avoid risk," MD and CEO of Pubali Bank Limited M A Halim Chowdhury told the FE while explaining the future trend in private credit growth.
He also said aggressive lending almost stopped following close monitoring by the central bank.
Talking to the FE, a senior executive of a leading private commercial bank (PCB) said most businessmen may follow a 'go-slow' policy on expansion of their businesses through opening new import orders before the budget.
He also said such credit growth is still higher than the target set by the central bank in its latest monetary policy statement.
Earlier on January 29 last, the central bank had projected in its second half-yearly (H2) monetary policy statement for the fiscal year (FY) 2017-18 that the private-sector credit would grow at 16.80 per cent up to June 2018. It was projected at 16.3 per cent earlier.
"The higher credit growth than that of deposit is mainly responsible for liquidity crunch in the country's banking system in the recent months," the private banker explained.
He also said the banks, particularly PCBs, are now collecting term-deposits offering double-digit interest rates.
The deposit growth had been on a slide, falling from 13.13per cent on December 31, 2016 to 10.94 per cent on June 30, 2017 and 10.60 per cent as on December 31 last.
On the other hand, credits climbed to 18.10 per cent, as on December 31, from 15.98 per cent on June 30 last calendar year. It was 15.32 per cent as on December 31, 2016.
Besides, around Tk 138 billion entered the BB vault in exchange for US$1.68 billion sold by the central bank to the banks during a period from July 01 to March 20 this year, according to a BB official.
The central bank of Bangladesh has resumed the support in recent months through selling the US currency to the banks directly to keep the foreign-exchange market stable.
siddique.islam@gmail.com