Weak banks to get inter-bank liquidity support, not overprinted money: Governor

Bangladesh Bank Governor Dr Ahsan H Mansur announced on Wednesday that no troubled or weak bank will receive liquidity assistance through the printing of new money. 

Instead, the central bank will provide support through inter-bank arrangements, acting as a guarantor for these transactions.

Speaking at a press conference following Bangladesh Bank's 'Bankers' Meeting,' Dr Mansur emphasised that the entire banking sector should not suffer due to the mismanagement of a few banks. "Considering the depositors, we want to offer limited liquidity support," he said, explaining that this support will be carefully managed to avoid exacerbating inflation.

Dr Mansur highlighted that a significant amount of money has been laundered through eight banks, leading to their current liquidity crisis. 

While the government is concerned about protecting depositors, he pointed out that fully resolving the liquidity issues of these banks would require an infusion of around two lakh crore taka, which could drastically increase inflation.

"We aim to provide limited liquidity support through inter-bank channels, with Bangladesh Bank serving as the guarantor," he said. 

The governor reassured depositors, urging them not to withdraw their funds en masse and to allow time for the banks to recover. 

"The entire banking sector should not be compromised due to the failures of these 7 to 8 banks," he added.

Since taking office as governor on August 20, Dr Mansur has met with business leaders at Bangladesh Bank's head office in Motijheel. 

He iterated his stance that weak and troubled banks would not be rescued by printing money or through sudden closures, stressing that these approaches would not provide a sustainable solution.