Dhaka, Bangladesh (BBN) – The Primary Dealers’ Bangladesh Limited (PDBL) will request the government to impose restriction on buying of saving certificates with provident funds for boosting the country’s secondary securities market.

The decision was taken at a meeting held at the Jamuna Bank Limited Thursday with its Chairman and Chief Executive Officer of the Sonali Bank Limited SA Chowdhury in the chair.

“We’ve decided to send a letter to the central bank requesting for taking necessary measures to stop purchase of saving certificates using provident funds,” a senior member of the PDBL told BBN after the meeting.

He also said the secondary market will be strengthened if the government imposes such restriction on buying saving certificates with such funds.

The central bank earlier selected nine PDs – eight banks and a non-banking financial institution (NBFI) – to handle government-approved securities in the secondary market.

“We’ve allowed the provident funds to buy the saving certificates since 2006 aiming to encourage investment of such funds and provide better financial benefit to the fixed income group,” a senior official of the National Savings Directorate said.

Currently, three government approved savings instruments being transacted.

The instruments are: 5-year Bangladesh Sanchaya Patra, 3-year Savings Certificate (interest paid on quarterly-basis) and 5-year Pensioners Sanchaya Patra (interest paid on quarterly-basis) bearing interest rates of 12 per cent, 11.50 per cent and 12.50 per cent respectively.

The PDBL meeting also recommended following T+0 method (transaction and payment on the same day) for settlement of transaction of the government approved securities under a proposed ‘delivery versus payment’ (DVP) system.

The Bangladesh Bank (BB) is now working on introduction of the DVP system by the end of June to gear up transactions of the government approved securities in the secondary market.

“We’ve supported the T+0 settlement method that would help the banks concerned to keep their liquidity position stable,” another member of the PDBL said.

He also said the new international standard transaction settlement system may help boost the trading on securities in the secondary market.

“We expect that the banks, particularly foreign commercial banks, would come forward actively in the secondary market after introduction of the settlement system,” he added.

Currently, three treasury bills (T-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 — 5-year, 10-year, 15-year and 20-year — are being traded.

BBN/SS/SI/AD-29May09-12:05 am (BST)