Dhaka, Bangladesh (BBN) – Bangladesh government has resumed borrowing from the banking system after more than one month suspension through holding auctioning its securities to finance budget deficit partly.

As part of the latest moves, the government borrowed BDT 15 billion from banks by issuing 91-Day and 364-Day treasury bills (T-bills) at auctions held at the central bank headquarters in Dhaka on Monday.

The cut off yield, generally known as interest rate, on 91-Day T-bills came down to 3.97 per cent on the day from 4.01 per cent of the previous auction held on July 17 last.

On the other hand, the pared-down yield on 364-Day T-bills stood at 4.43 per cent in a fall from 4.47 per cent of the previous auction held on July 10, according to the auction results.

The interest rate on T-bills fell slightly on the day as the banks rushed to offer their bids in auctions, a senior treasury official of a leading private commercial bank (PCB) told BBN.

He also said the banks are now interested to invest their excess liquidity in the risk-free government securities to minimise their cost of fund.

“The banks also use such securities for maintain SLR (statuary liquidity ratio) with the central bank,” the private banker explained.

Meanwhile, the volume of excess liquidity rose to BDT 1.10 trillion as on July 20 last from BDT 1.06 trillion in the last week of June, according to the central bank officials.

However, excess reserves, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, rose to around BDT 50 billion during the period under review from BDT 45 billion.

The government borrowed BDT 10 billion issuing 91-Day T-bills while the rest came from the 364-Day T-bills as per the auction calendar, issued by the Bangladesh Bank (BB) earlier.

The government is set to borrow Tk 78 billion in the month of September through issuing or re-issuing Bangladesh Government Treasury Bonds (BGTBs) and T-bills to meet its ongoing budget deficit partly.

Talking to BBN, a senior official said the government’s net borrowings from the banking system will be zero by the end of this month after making repayment of same amount against maturities of its securities.

“The government may borrow more by holding auction of 14-Day T-bills to meet its immediate expenses,” the official noted.

He also said the government borrowings from the banking system may increase in the coming months for meeting its budgetary expenses alongside reconstruction of 7130 kilometres of flood-hit roads in 21 districts across Bangladesh.

Higher import of food-grains, particularly rice, may also push up the government bank borrowings in the near future, according to the official.

The Ministry of Finance earlier had suspended its fresh borrowing from the banking system through cancelling auctions of its securities since July 23 till August 31 for ensuring proper cash management.

Besides, the government injected around BDT 20 billion into the market through making payments against maturity of the BGTBs in August, according to the officials.

Currently, four T-bills are transacted on auction to adjust government borrowings from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.

The T-bills are short-term investment tools issued through auctions, conducted by the central bank on behalf of the government.

Furthermore, five government bonds, with tenures of 02, 05, 10, 15 and 20 years respectively, are traded on the money market.

BBN/SSR/AD