The government has suspended the auctions of both treasury bills (T-bills) and bonds for the month of March to ensure its proper cash management, officials said.
Bangladesh Bank (BB) communicated the government's decision on suspension of auctions of T-bills and bonds to the commercial banks on Tuesday.
"We've conveyed the government's decision to the banks in line with the Ministry of Finance's advice," a senior official of BB told the FE.
The government's latest move came against the backdrop of holding adequate amount of liquidity recently, the central banker explained.
Currently, the government is holding nearly Tk 80 billion excess liquidity in its accounts.
Talking to the FE, another BB official also said lower implementation of projects under Annual Development Programme (ADP) and higher sales of savings instruments tipped the excess liquidity balance and helped the government lessen its borrowing from the banking system.
The government's net bank borrowing is still at a negative level, amounting to Tk 216.96 billion as on February 16, mainly due to higher growth in the savings certificate sales, according to the central banker.
The government has set a bank-borrowing target of Tk 389.38 billion for the ongoing fiscal year (FY), 2016-17, to partly finance its budget deficit.
Besides, the government is set to inject Tk 39 billion in the market for making payments against maturity of its T-bills and bonds in March from its excess liquidity, he noted.
Earlier, on May 04, 2015, the government suspended the auctions of treasury bonds for that month on the same ground.
Bankers, however, expressed concern over the government's latest decision, saying that it may push up the amount of excess liquidity with the banks.
The inter-bank call money interest rate may fall slightly, if BB's ongoing initiative of mopping up excess money from the market is not expedited, they added.
The overall excess liquidity in the banking system stood at around Tk 1.15 trillion on January 31. But major portion of the funds has been invested in the risk-free government securities, according to another BB official.
He also said excess reserves, generally known as excess over daily minimum cash reserve requirement (CRR), with the central bank, stood at around Tk 44 billion.
"The amount of excess liquidity fell slightly in January, as the overall bank credit increased," he noted.
The overall excess liquidity with the commercial banks was around Tk 1.16 trillion in December 2016.
"It may also hamper the overall profitability of the banks," a senior treasury official told the FE, while explaining the impact of the government's decision.
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.
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 years respectively, are traded on the money market.
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