Liquidity management in Commercial Banks of Bangladesh

Abstract

The report is devoted to the existing mechanisms of liquidity management in practice of commercial banks in Bangladesh. Firstly, it presents concepts and theoretical approaches to the liquidity management in commercial banks. It also includes the main requirements to the mechanism of liquidity management process. The major aims of the study are to find evidence that the commercial banks are following the proper liquidity requirements or not, whether liquidity ensures profit, ADR effects on liquidity, connection between GDP and liquidity. All commercial banks have been divided into three groups (SCBs, PCBs & FCBs) to represent the liquidity management of the banks. Data are collected from secondary sources and are analysed using financial ratios and liquidity indicators. Deposit, advance, profit, ADR have been considered as parameter to analyse the liquidity situation. It appears from the study that the banking sector of Bangladesh is maintaining higher liquidity from 2014 than regulatory requirement. As a result banks are facing no liquidity pressure because they are holding excess liquidity. The study recommends that there is a need for an optimum utilization of the available liquidity in a various aspects of investment in order to increase the banks‟ profitability and banks should adopt a general framework of liquidity management to assure sufficient liquidity for executing their operations efficiently. In the project, an attempt has been made to evaluate the efficiency in liquidity management of different categories of commercial banks like public, private and foreign banks in Bangladesh. Lastly, recommendations have been given on the basis of the findings from the analysis.