"What happened is our policy initiative"
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Photo: Barta24.com
The Executive Director and Spokesperson of the Central Bank Md. Mezbaul Haque referring to the allegation that Bangladesh Bank is printing money to meet the liquidity crisis of the 5 specialized banks of the country even though it has stopped giving loans to the government. What has actually happened is our policy initiative, he said.
He claimed that this baseless propaganda is driven by the instinct to speak without judging the facts. This senior official of the central bank expects everyone to play a more responsible role in order to maintain the positive momentum of the country's economy and not create a crisis of confidence among the common people. Md. Mezbaul Haque said these things in an exclusive interview given to the country's top multimedia news portal Barta24.com.
Barta24.com: Bangladesh Bank has stopped giving loans to the government by printing money, but there are allegations that it is printing money to five specialized banks of the country. What is the real story?
Md. Mezbaul Haque: Here we need to know how we ensure the liquidity of the bank. We say keep a cash reserve ratio or CRR of four percent. Suppose a bank deposits Tk. 100, then it has to keep 4 percent CRR and 13 percent SLR in non-cash form, total 17 percent. Why keep? Because the person who kept this Tk. 100 may need the money. He may need 50 taka, what about this 17 taka? Why did we talk about this 17 taka, usually 17 taka is our standard practice. What if a recipient needs 30 taka? Maybe you can add 2 more to the bank and pay 20 taka what will happen to the rest? Then the concerned bank will come to us (Bangladesh Bank) to take the remaining 10 taka. Shall we return him?
Barta24.com: Bangladesh Bank is the parent institution...
Md. Mezbaul Haque: If we return him, my economy will not work. Then all the banks have to sit with all the money, nobody can be given a loan. In that place, the Central Bank has this assurance that is to support a bank in case of crisis. That is the job of the central bank.
Barta24.com: This is a very normal process...
Md. Mezbaul Haque: Absolutely normal. Suppose, yesterday the bank took 10 taka, gave 30 taka to the customer, the next day it may be that the bank received a deposit of 50 taka. It will not give a loan on the same day. It will take time to process the loan. Then that bank is keeping a deposit of 50 taka, paid off that 10 taka and kept the remaining 40 taka - this is how liquidity management is right... this is the banking system (metaphorically I highlighted the matter with a calculation of Tk. 100). How many banks will be in this situation? Suppose there will be 3 banks. The rest will be fine. The next day may be 5 banks. Again, maybe a bank has made a mistake in liquidity management, pressure will be created for it, or people's trust in a bank has decreased. Then the customers of that bank will want to withdraw more deposits. All these are a part of the system, nothing new.
Barta24.com: What is the issue of printing money?
Md. Mezbaul Haque: Take a bank, I paid 10 taka yesterday, the next day the bank returned 10 taka; So the previous meaning has been torn? That means for short term management in the system money will be created for a day or two, this is part of the system. When I say money printing, when I see that the bank has taken 10 taka, does not pay for 2 years. So this 10 taka additional injection has been done, which will be paid tomorrow, is the money printed? Temporarily gone for today, will be paid again tomorrow... so what is the meaning of printing money?
Barta24.com: What is the basis of 'printing money' propaganda?
Md. Mezbaul Haque: It has no basis. Those who know up-to-date about this system know that if the Central Bank gives money, the money supply increases, if not, it does not. Maybe he doesn't know that we are giving money every day and taking money every day. They may think that the Central Bank is giving extra money to that bank...
Barta24.com: So if it is true - then what message is it sending to the common people who are making such statements...
Md. Mezbaul Haque: Who will do this challenge? Maybe some people are making such statements from the instinct of speaking without judging the facts. Those who are aware of the matter may not comment on matters that are not relevant. Because they know that nothing of one day can be considered as a phenomenon. Central Bank has some day to day management, we will do it. This is the traditional rule of the Central Bank.
Barta24.com: As it is being said that Islami banks are falling apart, what is your assessment?
Md. Mezbaul Haque: Yes, there may be governance issues, all banks will have more or less but Islami Bank-such a bank, you give me, I will cover what you have taken and give profit within one year. The fundamentals of this bank are so strong (of Islami banks). Calculate, still 40% of our foreign remittances come through Islami banks. If 100 million remittance comes then 40 million through Islami Bank. If you make a profit of 1 taka in 40 million, the profit will be Taka 4 crore. Multiplying 4 crores in 1 year is how much... Now he is saying it is all over! Yes, there is some drainage; But if you stop it, it will stop tomorrow. So I will close the Islami bank? It should be kept alive by support and that drainage should be closed. Management is needed, not that we are not. Talking about liquidity crisis, we are initiating policy rate, this is our policy initiative, you said, due to liquidity crisis of the banks... we want funds to clear, funds to banks to decrease, my inflation will decrease. This is my policy initiative. The banks you arrange are in crisis. Do not notice that we have taken the interest rate of 12 percent? This is happening due to Bangladesh Bank policy... Central Bank wants this. Yes, when we see that you don't have money to eat rice to take money, then we give again...
Barta24.com: What kind of responsibility do you expect from everyone?
Md. Mezbaul Haque: Everyone has a responsibility. I will be responsible in my place, you will be responsible in your place - the truth must be known to the people. Everything has two faces - one is the real face and the other is behind the face. We always work with real face. This is what I said..Liquidity problem..If there are 10 banks; then the liquidity management of 10 people will not be the same. It can be seen that 2 people are on the liquidity track. Suppose, I am supposed to return thousands of takas to you today, I came at the last moment and said - today not tomorrow. Can you tell your customer to deliver tomorrow, not today? Then maybe you will rush to the central bank to give us temporary funds..They have to manage this otherwise the customers will not have confidence. This is my regular function. I was told to do it. If you say after we do it, why did you give it? Then I will say, you have not read my mandate. It is clearly stated in the monetary policy, this is our mandate. It is said in the Bangladesh Bank order, but I will not give it to him?
Barta24.com: What kind of effect does this kind of propaganda have on the economy?
Md. Mezbaul Haque: If it has a negative impact in various fields including foreign investment. You will notice that it is very quiet now. When something happens, everyone looks for the precious moment…what will people eat in that precious moment? They try very hard to promote it. There is a need to be more responsible in this area. Every policy of Central Bank has a point of view. Every action we take has an explanation. That interpretation may be wrong, it may be right. That criticism is right. But if you rush the central bank to a place that is wrong, that is not acceptable. I am operating 60-61 banks; someone can come and tell me I need money. We give money in two ways - first: by keeping security and said for Islami banks, there is a problem.. because they do not have adequate security because there is no Islami instrument in the country. We have said that when there is a liquidity problem, when there is a management problem - then the Central Bank will look.
