Dhaka, Bangladesh (BBN) – One more primary dealer (PD) has informed the central bank about their intention to surrender the primary dealership licence by discontinuing participation in auctions of both treasury bills and bonds.

The PD bank has not taken part in auctions of both treasury bills and bonds since November 24 last, a member of the Primary Dealers Bangladesh Limited (PDBL) told BBN in Dhaka.

He also said the PD bank wants to continue its normal banking operations through surrendering the primary dealership licence.

Each of the PD banks has been suffering from liquidity shortfall, leading to their failure to maintain cash reserve requirement (CRR) with the Bangladesh Bank (BB), the PDBL member said, adding that at least seven out of 12 PD banks could not comply with the CRR of the central bank on Thursday last because of their liquidity shortfall.

Normal banking business of the PDs is being seriously hampered due mainly to immense underwriting obligation relating to the government securities.

“Our short-term and long-term business growth plans are being hampered seriously due to substantial growth of the government securities. This is also creating problems in our liquidity and cash flow forecast that, in turn, is also affecting our day-to-day operational and investment activities,” he noted.

Two non-banking financial institutions (NBFIs) have also been refraining from participation in auctions of both treasury bills and bonds from April 2011 on the same ground.

Under the existing provisions, only the PDs are allowed to submit the bid in the primary auction of government treasury bills and bonds.

The central bank introduced the system for the first time in Bangladesh for the April-June period of 2011 to boost the country’s secondary securities market through strengthening the activities of the PDs.

Under the system, non-PD banks and financial institutions are allowed take part in the auction only through the PDs.

The central bank of Bangladesh earlier selected 15 PDs — 12 commercial banks and three NBFIs — to deal with the government-approved securities in the secondary market.

The PDs will subscribe and underwrite primary issues and make secondary trading deals with two-way price quotations.

BBN/SSR/AD-15Jan12-2:15 am (BST)