Finally the Bangladesh Bank on Tuesday issued a directive to banks to bring down their Advance Deposit Ratio (ADR) to highest 83.50 per cent down from over 85 per cent now, by June 30.

However, this will be applicable for the conventional banks while such limit for the Islamic banks and the Islamic branches of the conventional banks will be highest 89 per cent, down from over 90 per cent now, where it is termed as IDR, reports the UNB.

Department of Off-site Supervision (DOS) of the central bank has issued the directives through a circular in this regard asking all the banks to comply with it.

As per the circular, until the next directive, the conventional banks will have to maintain their ADR at 83.50 per cent (80.50 per cent plus 3 per cent by the decision of bank board) and Shariah-based Islamic banks have to have the investment deposit ratio (IDR) at 89 per cent (88 per cent plus one per cent by the board decision).        

The circular came a day after Bangladesh Bank governor Fazle Kabir dropped a hint on Monday while unveiling monetary policy statement that the central bank will soon take measures to contain the aggressive banking by some banks.

Many economists were very critical of the central bank’s policy on not being very pro-active to reign in some banks’ aggressive banking crossing their ADR limits.

It was reported that some conventional banks’ ADR have crossed over 85 per cent while some Islamic banks’ over 90 per cent.

ADR is a limit that would not allow a bank to lend money over a certain percentage from its deposit-money. But some banks are not complying with the central bank’s set limit resulting in creating bad loans and non-performing loans.

As a result, many banks losing their capacity to continue lending, said central bank officials.

The central bank circular said that the banks have to maintain rationality to their deposit growth and lending growth to consolidate their banking strength so that quality lending is ensured by protecting the interest of the depositors.  

Recently, the central bank held meeting with the top executives of the banks to discuss the ADR situation.

The central bank urged the banks to take preparations for a new limit for ensuring quality investment.