Govt’s increased bank borrowing comes into effect Sunday

Dhaka, Bangladesh (BBN) – The revised bank borrowing target of the government for the current fiscal year (FY) ending June next will come into effect from Sunday, officials said.

The central bank of Bangladesh on Thursday issued a revised auction calendar, effective from April 1, asking all primary dealers (PDs) to follow the calendar of treasury bills (T-bills) and bond auctions for the last quarter of FY 2011-12.

“We’ve issued the revised auction calendar in line with the cash and debt management committee (CDMC)’s advice with indicative figures of the government borrowing for the April-June period of FY12,” a senior official of the Bangladesh Bank (BB) told BBN in Dhaka.

He also said the central bank is now working to raise the number of PDs aiming to ease the liquidity pressure on the existing ones through slashing their underwriting obligation of the government borrowing.

The CDMC at a meeting on Wednesday increased the government bank borrowing target by more than 47 percent to BDT 279 billion from the original budgetary target of BDT 189.57 billion to finance the budget deficit of FY12.

With the government’s latest move for increased borrowing from the banking system to meet its budget deficit in the upcoming quarter of the FY12, the banks particularly PDs are likely to face additional pressure on their liquidity position, bankers said.

They expressed their deep concern over higher bank borrowing of the government in the last quarter of FY12, saying that it may create fresh liquidity pressure on the commercial banks, particularly PDs.

“On an average, BDT 250 million will be collected as deposit by a PD to meet its underwriting obligation of the government borrowing, which will badly affect their normal banking activities,” a senior member of the Primary Dealers Bangladesh Limited (PDBL) said while replying a query relating to their liquidity situation.

The central bank earlier selected 15 PDs — 12 banks and three non-banking financial institutions (NBFIs) — to deal with government securities in the secondary market.

 

BBN/SSR/AD-29Mar12-9:55 pm (BST)