Dhaka, Bangladesh (BBN)– The central bank of Bangladesh is planning to set up a Cash Management Cell (CMC) under its Debt Management Department (DMD) to meet instant liquidity requirement of banks, officials said.
The issue was disclosed at a review meeting with the primary dealer (PD) banks, held at the central bank headquarters in Dhaka on Wednesday, with Md. Khurshid Alam, General Manager of the Bangladesh Bank (BB), in the chair.
The senior officials of the PD banks at the meeting proposed the central bank to take such a measure, as the BB is the last resort to facilitate proper liquidity management in the banking system.
At the closure of businesses, the central bank may arrange Repo and Reserve Repo auctions to help the bank concerned comply with the BB’s cash reserve requirement (CRR) rules, according to the proposal.
Talking to the BBN, a senior executive of a PD bank said instant funds will be available to all the banks, if the central bank sets up such a cell.
Normally, the banks do not lend their excess funds to others without having counterparty limits that are set by an entity in order to manage and control risks, he added.
“Excess funds with both the commercial banks as well as the government may be used through the cell,” the private banker explained.
“We’re considering the proposal positively,” a BB senior official told the BBN after the meeting.
He also said the central bank would take its final decision after examining different aspects of forming the proposed cell.
The PD banks also proposed the central bank to revise the cut-off time for submitting bids for Repo, Reverse Repo, Special Liquidity Support and Special Repo auctions at 5:15 pm on each working day instead of the existing time at 12:15 pm.
The PD banks also sought introduction of an auction calendar of six-month tenure instead of the existing single-month one to manage funds efficiently.
The central bank of Bangladesh earlier selected 21 PDs to manage the government-approved securities in the secondary market.