Dhaka, Bangladesh (BBN) – The country’s apex trade body has sought withdrawing of a central bank circular, which requires the country’s 25 non-primary dealer banks to accept up to 40 percent of government securities.
“If the non-PD banks have to meet up to 40 percent of the government’s loan demand, then the liquidity position of these banks will shrink and as a result they will not be able to invest in any productive sector,” the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) said in a statement on Monday.
On July 24, the central bank introduced a new policy on investment in government securities with a view to shifting the liquidity pressure from the primary dealer (PD) banks to non-PD ones, partially.
Under the new policy, the government treasury bills (T-bills) and bonds will be distributed among the PD and non-PD banks at a certain ratio. The PDs will have to receive 60 per cent of the notified amount of investments in such tools while the non-PDs must accept the remaining 40 per cent.
The new policy will come into effect from August 1 this year, according to the circular.
The apex trade body said the new policy would hamper growth in the private sector and ultimately the government would not be able to achieve its targeted growth.
The FBCCI said the circular went against the spirit of the July-December monetary policy where the central bank mentioned that it would pay special attention to the private sector to ensure enough cash flow to it.
“Besides, the liquidity crisis in private banks will worsen as they take short-term loans from people, but 70 per cent of the government loans are of 5, 10 and 20-year terms.”
BBN/SSR/AD-31July12-11:21 am (BST)
