Businesses hit by drought of cash supply

Businesses in Bangladesh, especially those that mostly deal with cash transactions, yesterday said they are contending with a liquidity crunch as the country's central bank has placed a limit on daily cash withdrawals from banks.

On Saturday, banks were told to disallow daily cash withdrawals of more than Tk 2 lakh per account. The banking regulator had limited daily cash withdrawals to Tk 1 lakh per account from last Thursday before deciding to raise the ceiling.

The central bank took the decision due to security concerns as police are yet to return to work fully after attacks on around 450 police stations following the uprising that led to the fall of former prime minister Sheikh Hasina.

However, many customers were not even given the stipulated amount because of a cash crisis at banks. This is because cash cannot be regularly transported to ATMs and branches amid the lack of security.

"I repeatedly requested the official as I urgently needed Tk 40,000 for a family emergency. But they denied my request. I do not know how I will manage the rest of the amount," lamented a frustrated school teacher in Dhaka's Dohar, who was given the scope to withdraw only Tk 10,000.

Some businesses said they might be able to manage, at least for this week. But if the cash crisis lingers and restrictions remain next week, they will be in a tough situation, especially as their operations have ground to a halt since the second half of July, when violence erupted centring the quota reform movement by students.

Abu Bakar Siddique, an oil wholesaler in Karwan Bazar, one of the largest kitchen markets in Dhaka, said his bank would not allow more than Tk 1 lakh to be withdrawn.

"This is a big problem. As a result, the normal pace of business is being disrupted," he added.

Siddique informed that most business transactions are now mostly being conducted through bank-to-bank transfers or real-time gross settlements.

Taslim Shahriar, deputy general manager at Meghna Group of Industries, a major commodity importer and processor, said not all businesspeople accept cheques.

"We have to pay in cash too but now, transactions are only taking place through bank-to-bank transfers and cheques. The sooner this problem is resolved, the better for us," he added.

Abul Hashem, president of the Bangladesh Sugar Traders' Association, said: "I am not getting the amount of cash that I am supposed to be able to withdraw. This is a big problem."

A senior official of another major commodity importer and processor, on condition of anonymity, said: "I could not send the money I was supposed to dispatch to my factory today [Sunday]. I needed Tk 10 lakh, but I could only withdraw Tk 2 lakh in cash.

"As such, I am unable to pay the full salaries to those who are daily wage earners. I told the workers to wait this week as there is no way I can manage cash now," the official added.

The official also said daily wage earners such as day laborers are now facing a very difficult situation.

"It's inhumane for them. If this situation persists for long, it will be very difficult to conduct business," the official added.

Riad Mahmud, managing director of National Polymer Group, said they were facing trouble in making payments to local raw material suppliers as they do not have bank accounts.

"Small vendors and local dealers do not maintain bank accounts. So, we have to pay them in cash. But we are facing cash shortages due to the withdrawal limit," he said.

"Besides, we pay our casual staff in cash every week, so we need cash in hand regularly," he added.

Mahmud said he believes the situation will hamper business if the situation persists.

However, it will not substantially hinder activities if it lasts a short time, he added.

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said some investors alleged they are facing difficulties due to the sudden decision.

However, he said that while it should not affect salary payments, any sudden expense, such as for purchasing spare parts, or other immediate needs would cause trouble.

Mohammed Amirul Haque, managing director of Premier Cement Mills Limited, said this decision would create a short-term liquidity crisis.

On the issue, Finance and Planning Adviser Salehuddin Ahmed yesterday told reporters that the limit on cash withdrawals was required given the current situation.

Mohammad Ali, managing director and chief executive officer of Pubali Bank Ltd, said it is better to make electronic transactions in light of the current situation.

"The culture of electronic transfers needs to be created. Everyone needs to understand that it is safe," he said while adding that it is a good initiative that the central bank imposed the limit for the sake of security.

"It is not credible for a person receiving payments of Tk 50,000 to Tk 100,000 to not have a bank or bKash account. So, it is absurd if someone like that says they don't have either," Ali added.