Don’t deposit funds with weak banks

The energy ministry has asked Bangladesh Petroleum Corporation (BPC) and Petrobangla not to deposit their funds with weak financial institutions in the hope of getting higher returns in the form of interest.

"Institutions with good CAMELS ratings will have to be selected to deposit fund as per instruction given by the finance division," according to a letter sent by the ministry to the two state-owned organisations.

"Capital of BPC and Petrobangla will be at risk, if fund is deposited with the financially weak banks and NBFIs," the letter said.

The CAMELS rating is an internationally recognised rating system that indicates the actual financial health of banks and non-banking financial institutions (NBFIs).

The energy ministry has given the instruction at a time when a good number of NBFIs have failed to repay depositors' money despite the maturity of funds.

Such failure has created panic among individuals, the government and private entities.

The central bank has recently taken a decision to liquidate People's Leasing and Financial Services (PLFS), an NBFI, due to the deterioration of its financial health and severe liquidity crunch. A significant amount of government and corporate funds has been stuck with PLFS.

The Farmers Bank, which has recently been named Padma Bank, also faced severe cash crunch and failed to pay back the depositors' money last year because of financial scam. Besides, the majority of banks are now offering high interest rate to attract depositors to mitigate their liquidity crunch.

In many cases, some banks and NBFIs lure the government, semi-government organisations and corporations to keep their deposit with them, promising high interest rate, the letter said.

The ministry asked its wings not to be attracted by that kind of offer and keep their funds with institutions which have strong financial base.