Dhaka, Bangladesh (BBN)– Bangladesh’s bankers have expressed concern over the government’s decision on cancellation of its securities auctions for this month.
They also said that the government’s latest decision on auction cancellation may push up the amount of excess liquidity with the banks further.
Currently, the overall excess liquidity with all banks came down to below BDT 1.0 trillion from BDT 1.23 trillion as on December 31 last year. It was around BDT 1.0 trillion in the last week of April, 2017.
The inter-bank call money interest rate may fall slightly, if the central bank’s ongoing initiative of mopping up excess money from the market is not expedited, they explained.
At present, the inter-bank call money rate remained stable in the range between 1.80 per cent and 4.50 per cent mainly due to sufficient inflow of fund into the market.
The government had planned to borrow BDT 54 billion through holding the six auctions of both treasury bills (T-bills) and bonds rest of days this month, according to the auction calendar.
Earlier on Thursday, the government suspended fresh borrowing from the banking system through cancelling upcoming six auctions of its securities for this month.
As per the decision, the auctions of the government securities both T-bills and bonds will not to be held on July 23, 25 and 30 respectively.
Talking to BBN, a senior official of a leading private commercial bank said it may also hamper the overall profitability of the banks by the end of this calendar year.
He also said the growth of the secondary bond market may be hampered following the government’s decision on the suspension of its securities auctions.
The government had set a bank-borrowing target of BDT 282.03 billion for the ongoing fiscal year (FY) 2017-18 18 to finance the budget deficit partly.
Under the proposed arrangement, BDT 208.87 billion will be borrowed from the banking system by issuing long-term Bangladesh Government Treasury Bonds (BGTBs) while the remaining BDT 73.16 billion through auctions of short-term T-bills.
Currently, three T-bills are being transacted through auctions to adjust the government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with tenures of 02, 05, 10, 15 and 20 years are traded on the market.