Dhaka, Bangladesh (BBN) – Excess liquidity in the country’s banking sector decreased by 3.97 percent July 2010 as investment demand has increased reflecting higher credit flow in the private sector, officials said.

The overall excess liquidity with the commercial banks came down to BDT 331.27 billion in July this year from BDT 344.98 billion in June 2010, according to the central bank statistics.

“The excess liquidity started showing a declining trend in July which continued in the months of August and September due to the Eid-ul-Fitr festival,” a senior official of the Bangladesh Bank (BB) said, adding that the excess liquidity may also fall due to increasing government borrowing for implementation of budgetary developments programs.

The excess liquidity of the state-owned banks stood at BDT 141.19 billion as on July 31, 2010, while that of the private commercial banks was at BDT 153.90 billion. The excess liquidity of the foreign banks was BDT 36.17 billion at the same time.

Total liquid assets of commercial banks stood at BDT 868.32 billion in July this year against BDT 871.96 billion of June 2010.

“Scheduled banks holding liquid assets as of July, 2010 in the form of cash and balances with Sonali Bank, Bangladesh Bank and unencumbered approved securities are 5.17 per cent, 32.16 per cent and 62.68 per cent of total liquid assets respectively,” the central bank said in a report on liquidity position.

Most of the banks have invested their excess liquidity in different government treasury bills and bonds to minimize the cost of funds, the BB official said.

Currently, three treasury bills are being transacted through auctions to adjust the government borrowing from the banking system.

The T-bills have 91-day, 182-day and 364-day maturity periods.

On the other hand, four government bonds of 5-year, 10-year, 15-year and 20-year terms are being traded on the market.

BBN/SI/AD-05Sept10-11:12 am (BST)