Wednesday, January 18, 2023
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BusinessNBE ready to help Banks facing liquidity shortages

NBE ready to help Banks facing liquidity shortages

The National Bank of Ethiopia (NBE) affirmed its readiness to loan money to any of the 19 commercial banks if they experience liquidity shortages, even though they are in good condition at the moment.

Mentioning that no bank is currently experiencing liquidity shortage, Governor of NBE, Yinager Dessie explained in an interview with The Reporter that there is enough amount of reserve money for banks to borrow if they face shortage of cash.

“So far, we have not received request from any of the commercial banks as their liquidity position is in good condition. This is a huge departure from last year when banks were working under tight liquidity,” said Yinager.

Ever since the Central Bank implemented a transaction limit preventing individuals and businesses from making more than five transfers per week, there has been concern over the growing tendency of cash hoarding among traders.

“We have not come across any evidence showing cash hoarding practice is growing. In fact, our analysis suggests that deposits mobilized by banks are increasing,” Yinager added.

Last year, banks were facing a critical shortage of cash forcing them to work under tight liquidity. Some banks were even slammed for lending more than 100 percent of their outstanding deposits.

“Last year, we injected more than 33 billion Birr. But that is not happening right now, showing how the banks are in a stable condition,” Yinager explained.

In a March 13, 2021 interview with The Reporter, President of Dashen Bank, Asfaw Alemu said the issue of liquidity is currently not as tight as that of last year.

“Although I cannot confirm whether the practice of cash hoarding has grown or not, it is visible that banks are now in a good position in terms of deposit mobilization. Our liquid assets are 16 percent of its total assets,” he said.

Sources also told The Reporter that an ongoing liquidity problem has been raised as a reason by some banks to reject their demands for loans.

Prime Minister Abiy Ahmed (PhD), in his latest appearance at the parliament earlier last week, explained there is significant growth in savings after the demonetization of Birr.

“Within the first six months of the existing fiscal year, financial institutions increased their savings to 1.2 trillion Birr, maximizing their lending capacities. Six million bank accounts were also opened,” he said.

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