The Bank of Maldives (BML) is in a robust financial position despite challenges in managing its card payments, the central bank, Maldives Monetary Authority (MMA) has said.
On Sunday, BML triggered nationwide panic by announcing the suspension of foreign transactions for cards linked to Maldivian Rufiyaa (MVR) accounts. However, the decision was reversed later the same day after the Maldives Monetary Authority (MMA) intervened and urged the bank to reconsider its stance.
The MMA said in a statement that the authority requested BML to reconsider its decision as the move would negatively impact both citizens and businesses.
MMA said that it had held multiple meetings with BML to understand the difficulties the bank faces in handling overseas transactions with its cards. BML reported a significant rise in the volume of foreign currency card transactions since the COVID-19 pandemic.
The MMA noted that the Maldivian banking system experienced a surplus of MVR liquidity due to increased money printing to manage the government’s cash flow. By the end of July, the banking system’s surplus liquidity averaged MVR 6.7 billion, with BML accounting for a substantial portion. The bulk of the surplus liquidity was disbursed by banks in the form of personal loans, with the total amount disbursed by the banking system rising from MVR 2.9 billion at the end of 2019 to MVR 6.6 billion at the end of June this year. The surge in personal loans is believed to have contributed to the increase in card transactions during this period.
The MMA has also reported an increase in the amount of dollars issued to banks year on year, with $267 million sold by the end of 2022 and $307 million by the end of last year. This year has seen a further increase, with BML receiving a significant portion of the funds. The MMA emphasized that other banks besides BML are also offering dollar transactions with MVR debit cards, and noted that the authority plans to prioritize banks that consider public concerns when determining the dollar allocation ratio in the future.
The statement assured that the MMA is working to bring modern solutions to some of the systemic problems facing the financial sector. These changes will create a more favorable environment for foreign direct investment in the Maldives.
