Dhaka, Bangladesh (BBN) – The central bank of Bangladesh prefers its 30-day bill than reverse REPO for mopping up excess liquidity from the market, officials said.

The Bangladesh Bank (BB), the country’s central bank, withdrew BDT 58.70 billion from the market using its 30-day bills on Monday.

The rate of weighted average yield of the accepted bids was 3.39 per cent, according to the auction result.

Market operators expect that the inter-bank call money rate, which is hovering between 2.50 per cent and 5.00 per cent, may move slightly upward with the resumption of the auction.

The central bank resumed the auction of 30-day Bangladesh Bank Bills on October 26 aiming to mop up surplus liquidity from the market.

The BB earlier used the bills for purchasing the US dollar from the banks directly to keep reserve money within its monetary progarmme.

“Mopping up of excess liquidity from the market will depend on the yield of the bill,” a senior treasury official of a leading private commercial bank told BBN in Dhaka.

The central bank of Bangladesh reintroduced 30-day and 91-day Bangladesh Bank Bills in October 2006 as monetary policy instruments following decision that the government treasury bills and the bond auctions are exclusively used for the government debt management.

However, the auction of 91-day Bangladesh Bank Bills was discontinued to avoid duplication with 91-day Treasury Bills from January 8, 2008.

On the other hand, the central bank withdrew BDT 15 billion on the same day from the market through reverse REPO auction. The rate of interest on reverse Repo was 5.25 percent.

On Monday, the BB received 15 bids from the banks and non-banking financial institutions (NBFIs) amounting to BDT 83.38 billion but accepted BDT 15 billion.

Such partially acceptance policy has been followed since October 19 last to force the banks and NBFIs for taking effective measures to invest their excess liquidity particularly in different productive sectors.