Dhaka, Bangladesh (BBN) - The country’s primary dealers (PDs) are incurring substantial loss mainly due to holding of low-yielding government approved securities, bankers said.
Growth in operating profits of three out of 12 PD banks was negative up to this May because of the valuation adjustment loss of the government securities, bought between July 2009 and December 2011, they added.
The government issued bonds worth nearly BDT 250 billion during the period under review to finance its budget deficit.
"A major portion of the lower-yielding securities particularly Bangladesh Government Treasury Bonds (BGTB) are being hold by the PD banks," a senior member of the Primary Dealers Bangladesh Limited (PDBL) said.
He also said the actual price of the bonds decreased significantly because of higher yield on the current securities.
"The price of securities was down when the current yield on the securities has increased," the PDBL member said while explaining the loss on the government securities, particularly bonds.
The average yield on securities is now raging between 11.40 percent and 12.10 percent, from 7.50-9.00 per cent earlier, according to the market operators.
The PD banks have been suffering from liquidity shortage, leading to their failure in maintaining cash reserve requirement (CRR) with the Bangladesh Bank (BB).
"At least five PD banks could not comply with the CRR of the central bank Sunday because of their liquidity shortfall," another PDBL member said.
He also said excess holding of the government securities by 12 PD banks stood at around BDT 280 billion after maintaining their statutory liquidity ratio (SLR), creating liquidity pressure on the commercial banks.
"Our normal banking businesses are being seriously hampered due mainly to immense underwriting obligation regarding the government securities," the PDBL member said.
Under the existing provisions, only the PDs are allowed to submit the bid in the primary auction of the government treasury bills and bonds.
The PDBL member also said the PD banks are now incurring another type of loss from sale of the government securities to the non-PD banks with lower prices.
The central bank earlier selected 15 PDs -- 12 banks and three non-banking financial institutions (NBFIs) -- to deal with the government-approved securities in the secondary market.
BBN/SSR/AD-19June12-9:40am (BST)
