Liquidity Crisis Essay

At present our moneymaking(prenominal) banks are release a difficult situation. Most of the banks are in runniness crisis. And this eccentric person of shortage of money makes difficult to engage in various transactions. straightway the main ca aims behind this are given below-Currency appreciate In the recent year, our soil has experienced a decline in the value of Tk against currency which has created has huge liquidity crisis in the banking sector. For this reason our country has failed to collect maximum amount of US dollar required to hold letter of credit (LC) for local businessmen to import essential commodities for the country. As a result the importer is facing a severe crisis in their business. authorisation reserve Banks need to reserve huge amount of money to celebrate CRR and SLR. As it is mandatory duty of them. BB has recently increased the rate of CRR and SLR as result the problem of liquidity crisis has been aggravated recently.Government credit To decre ment the deficit work out unit govt. are taking loan from commercial banks. And this thing create extra burden to our banking sector and it cause more than liquidity crisis in that sector.Inflation The liquidity crisis of the banking sector has been accelerated by the increased amount of inflation, thus increasing the price of overall commodities for ecumenic people. To keep pace with this inflationary effect, the people withdraw savings from the banks and use this fund for their transaction expenditure. As a result bank faces liquidity crisis.Non-recovery loan the overall percentage of recovery loan is very alarming. And this is another(prenominal) important reason to increase the liquidity sector of commercial banks.Proposed budget the proposed budget create a liquidity in the banking sector referable to its over-reliance on domestic borrowing for implementing the annual development program.