Dhaka, Bangladesh (BBN) – The central bank of Bangladesh is going to increase the net open position (NOP) of holding limits of foreign exchange by the commercial banks to keep the market stable.

The new NOP will be fixed on the basis of 15.00 per cent of the total capital as on December 31, 2008 of the banks concerned instead of the existing 12.50 per cent, officials said on Sunday.

“We’ll increase the NOP limit of the commercial banks thus empowering them for holding more foreign currency,” a senior official of the Bangladesh Bank (BB) told BBN in Dhaka.

On May 7, the central bank re-fixed the NOP limit of all commercial banks to US$432 million from $190 million earlier.

The BB took the latest move against the backdrop of increased flow of foreign exchange in the market as well as strengthening the capital base of the banks because of falling trend in opening of letters of credit (LCs) against imports recently.

Besides, the declining trend in prices of major commodities including petroleum products in the global market has also boosted the supply of the greenback in the local market, the BB official added.

“The central bank will issue a directive in this connection within a day or two,” another BB official said, adding that the BB’s intervention in the inter-bank foreign exchange market through purchase of US dollar from the banks directly would be reduced after the NOP limit is increased.

The central bank of Bangladesh purchased $1.034 billion from commercial banks until September 2 last as part of the move.

In fiscal 2008-09, the BB bought a total of $1.48 billion directly from the commercial banks against only $202.50 million of the previous fiscal, according to the central bank statistics.

BBN/SS/SI/AD-07September09-1:35 pm (BST)