The situation has become so biting that some of the small private commercial banks (PCBs) have not been able to settle their letters of credit (LCs) payments for the last couple of months, putting Bangladesh in a spot, according to bankers.

An abnormal rise in imports from September of the just concluded fiscal year has led to the crisis despite a downpour of assistance -- about $300 million -- from the World Bank and the International Monetary Fund (IMF).

Imports rose by 26 percent last fiscal year against the previous year's only 12 percent.

"The central bank has to intervene to ease the situation soon," said the chief executive of a foreign bank. "Many of the local banks have been failing in their payment obligations to foreign suppliers. This will give Bangladesh a bad image if things are left to continue."

A top Bangladesh Bank official yesterday told The Daily Star on condition of anonymity that a high import growth is responsible for the current situation.

"Import growth is still very high at 20 percent and every month letters of credit valued at $1 billion are being opened. This is way too heated a situation," he said. "But we cannot sustain this trend anymore. We have to rein in the wild horse and the banks have to consider their funds situation before opening any new LC."

Khondokar Ibrahim Khaled, managing director of Pubali Bank, said the crisis is giving a bad signal abroad. "This is an outcome of bad fund management of the smaller banks," he said. "They had opened LCs without thinking of their funds position."

But many bankers have held the Bangladesh Bank partly responsible for the crisis.

"They have been barring us from properly quoting rates for dollar," said managing director of a big private bank. "If we quote above Tk 64 for a dollar, the central bank calls us and asks us to lower rate. Had the market force been allowed to play, dollar would have been much costlier, crowding out importers of luxury items."

As the crisis lingers, the central bank has also been clench fisted in releasing dollars to banks, a claim contested by a top central bank official.

"The Bangladesh Bank has mainly been giving dollars to the nationalised commercial banks for petroleum payments," said the CEO of a foreign bank. "The private banks get a fraction of their need only for priority sector LC settlement."

Some of the weak private banks have even continuously been exceeding their open positions for the last few weeks.

Pubali, Sonali, Agrani, Uttara and National banks had meantime quoted Tk 63.75 for dollar in the interbank market and selling the greenback to clients at Tk 65. However, dollar rates against cross currency have been quite high at around Tk 66.

Bankers feel that the pressure on banks will increase in the second week of July as more and more LCs opened during the peak of last fiscal year will mature. However, they feel that the IMF's release of $98million in anti-poverty and trade loans in the next few days may ease the situation a bit.