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Liquidity support

Central bank to buy T-bills, bonds from banks

FE REPORT | March 23, 2020 00:00:00

The central bank will inject fresh fund through purchasing government securities directly from the banks to avert any unwanted liquidity satiation stemming from the cocronavirus pandemic.

As per the latest decision of the Bangladesh Bank (BB), interested commercial banks as well as non-banking financial institutions (NBFIs) may sell their excess securities after complying with the statutory liquidity ratio (SLR), officials said.

The central bank issued a circular in this connection on Sunday and asked the managing directors (MDs) and chief executive officers (CEOs) to communicate with its department concerned, if necessary.

The banks may sell their surplus securities to the central bank from today (Monday) at the market rate, they added.

"We want to extend our liquidity support to the banks through purchasing securities in order to avert any possible liquidity crunch in the market due to COVID-19," a senior BB official told the FE.

The market rate for the securities will be fixed on the basis of cut-off yield on the securities at the latest auction, he explained.

Currently, four treasury bills (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.

The T-bills are short-term investment tools issued through auctions, conducted by the central bank on behalf of the government. Furthermore, five government bonds with tenures of two-, five-, 10-, 15- and 20-year respectively are traded on the market.

On Sunday night, the central bank also issued two separate circulars asking all the scheduled banks to take effective measures to prevent the spread of COVID-19 by forming Central Quick Response Teams and taking others initiatives.

The banks have also been instructed to ensure cash reserve at their branches.

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