Janata Bank, one of Bangladesh’s largest state-owned banks, is facing a severe financial crisis and has urgently requested Tk10,000 crore (around $880 million) in liquidity support from the Bangladesh Bank. The request comes as the bank struggles with mounting loan defaults, a high volume of customer withdrawals, and a growing capital shortfall.
Why Janata Bank Needs Help
Md Mazibur Rahman, the bank’s Managing Director, explained that the funds are essential to stabilize the bank’s operations and prevent further withdrawal pressures. “Many customers are withdrawing their money, and if we don’t act quickly, things could get worse,” Rahman said. As of September 2024, more than 60% of Janata Bank’s loans, amounting to Tk60,000 crore, are unpaid, contributing to a net loss of Tk1,500 crore. This has resulted in a large capital shortfall, pushing the bank into a precarious financial situation.
The Bank’s Daily Borrowing Crisis
To manage its daily operations, Janata Bank has been borrowing between Tk18,000 crore and Tk20,000 crore every day. This highlights the depth of the liquidity crisis the bank is facing. The requested Tk10,000 crore loan from Bangladesh Bank is expected to help stabilize the bank’s cash flow and avoid further financial strain.
Widespread Banking Struggles
Janata Bank is not alone in seeking liquidity support. Other troubled banks, including Padma Bank, have also requested financial aid from Bangladesh Bank. In November 2024, the central bank provided Tk22,500 crore to six struggling banks. However, the Bangladesh Bank has expressed concerns about inflation and is balancing liquidity support with efforts to control money supply.
Looking Ahead
With Janata Bank’s chairman describing the current situation as the “deepest crisis in its history,” the bank’s future depends on whether Bangladesh Bank approves its emergency loan request. While this support may offer temporary relief, experts warn that deeper reforms in the banking sector are needed to address systemic issues.
Source: The Business Standard
