BB starts direct sale of govt securities to banks

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Siddique Islam
Bangladesh Bank (BB) has started selling government securities directly to the commercial banks aiming to pump out excess liquidity from the money market, officials said.
The central bank has taken the move against the backdrop of pilling up of excess liquidity in the banking sector to all-time high at Tk 347 billion in June 2009, registering a 165 per cent growth over that of the same period of the previous calendar year.
"We've started outright sale of the government securities to the commercial banks aiming to mop up the excess liquidity from the market that would also help curb inflationary pressure on the economy," General Manager of the Debt Management Department of the BB Mijanur Rahman Joddar told the FE Saturday.
He also said it is a temporary measure to prop up the country's money market.
As part of the move, the central bank sold 364-day treasury bills (T-bills) worth Tk 1.26 billion to two commercial banks on Wednesday, the BB officials confirmed.
On Thursday, the central bank also sold T-bills worth Tk 700 million to a foreign commercial bank using its secondary window, they added.
The BB is now holding auctions of T-bills worth Tk 15 billion and bonds worth Tk 19 billion.
Currently, four government bonds -- 5-year, 10-year, 15-year and 20-year tenure -- are being traded in the markets.
On the other hand, three 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.
Besides, the BB will reintroduce the auction of 30-day Bangladesh Bank T-bills as monetary tool from Monday.
Market players see the BB's latest moves as timely and appropriate, which will help bring dynamism in the inter-bank money market.
"The call money rates almost stagnant in the last couple of months in the highly liquid money market," a senior treasury official of a commercial bank told the FE.
The call money rate, in some cases, came down to as low as 0.10 per cent in inter-bank money market Thursday as the banks are now awash with excess liquidity.
He also said the impact of excess liquidity may ease in the near future as a result of the short-term measures of the central bank.