However, banks that have sufficient liquid assets or a stable funding structure will be able to tide over the issue. The agency said that weaker banks with fewer government securities would find it difficult to access funds from the interbank market.
Although banks can fill this liquidity crunch through lending, the cost of such funds has increased materially as demand for them has increased and Bangladesh Bank has tightened its monetary policy to reduce inflation.
The weighted average of interbank repo rates increased from 1.4 percent at the beginning of the year to 8.1 percent at the end of 2022, while the weighted average of interbank overnight rates rose from 2.7 percent to 5.8 percent, the highest since 2015.
The central bank also raised the repo rate at which it lends to banks from 4.75 per cent in early 2022 to 6 per cent in January. Interbank rates have improved somewhat in February, but rates remain high.
It described Islamic banks as more vulnerable because their liquidity buffers are lower and their profitability is generally weaker.
Islamic banks are more vulnerable because of their weak liquidity cushion and restrictions on traditional interest-bearing government bonds, the report said. Bangladesh also has a limited amount of liquid Sharia-compliant equipment.