The central bank has introduced 360-day special repo facility to help banks and financial institutions secure funds needed to implement the economic relief packages.
Both rate and auction amount of the special repurchase agreement (repo) facility will be fixed by the committee of Bangladesh Bank (BB).
The body will consider the existing policy repo rate along with the overall money market situation, according to a notice issued by the central bank on Wednesday.
The central bank has already slashed repo rate by 75 basis points to 5.25 per cent in two phases from 6.0 per cent, though the reverse repo rate remains unchanged at 4.75 per cent.
Senior bankers welcomed the BB's step, saying it will help the banks and financial institutions bolster their fund availability.
"The measure will help keep the liquidity inflow stable in the market," Mehmood Husain, Managing Director and Chief Executive Officer of NRB Bank Limited, told the FE.
The auctions of ongoing overnight, 7-day, 14-day and 28-day tenors of repo facility will also be continued, a BB senior official said.
Participating banks and non-banking financial institutions will avail such term repo against their excess securities after complying with the statutory liquidity ratio (SLR) rules.
Currently, the banks and NBFIs are holding around Tk 800 billion in additional government-approved securities, which would be useful for accessing such a facility, the central banker explained.
He said the facility will be treated as collateralised repo, where the ownership of the securities will take the advantage.
But "the banks cannot use these securities for other purposes like inter-bank repo," the central banker noted.
The central bank will provide such repo against the treasury bills (T-bills) and bonds after applying 15 per cent and 5.0 per cent margin of the securities' face values respectively, said the missive.
Currently, four T-bills are being transacted through auctions to adjust the government's borrowings from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
Also, five government bonds with tenures of two-year, five-year, 10-year, 15-year and 20-year are traded on the market.
The banks and non-banks will have to submit report on a monthly basis to the Debt Management Department of the central bank with sector-wise investments from the term repo facility.
Collected fund from the special repo will not be allowed to invest in the government-approved securities and the BB bills without prior approval from the debt management wing, according to the notice.
Meanwhile, the government agencies and banks have almost completed their preparations for implementing 18 economic relief packages worth almost Tk 1.0 trillion designed to tackle the fallout of the coronavirus pandemic.
The packages, which equal to 3.5 per cent of the gross domestic product (GDP), will be implemented under the supervision of the central bank and the ministry of finance.
The banks and non-bank lenders will execute the packages, relying largely on the central bank's refinancing scheme and other facilities.
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