The government has suspended further borrowing from the banking system through cancelling upcoming six auctions of its securities for this month to ensure proper cash management, officials said.
The Bangladesh Bank (BB) apprised on Thursday the commercial banks of the government's decision on cancellation of auctions of both treasury bills (T-bills) and bonds.
"We've informed the banks of the government's decision in line with the finance ministry's advice," a senior BB official told the FE.
He also said the issue is likely to be discussed in the next CDMC (Cash and Debt Management Committee) meeting scheduled to be held on July 26.
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 around Tk 30 billion excess liquidity in its accounts.
"Higher sales of savings instruments along with a rising trend in revenue collection have pushed up the government's excess liquidity balance," another BB official explained.
Such excess liquidity has also helped the government lessen its borrowing from the banking system, according to the central banker.
The government's net bank borrowing is still at a negative level, amounting to Tk 24.10 billion as of July 13, mainly due to higher growth in the savings tools sales, the official added.
However, the government did not borrow from the banking system in net terms during the just-concluded fiscal year (FY); rather it repaid a large portion of debts.
The government paid back Tk 180.29 billion to the banks in the FY 2016-17 as against its borrowing of Tk 48.07 billion in the FY 16.
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 government had planned to borrow Tk 54 billion through holding the six auctions of both T-bills and bonds rest of days this month, according to the auction calendar.
"It may also hamper the overall profitability of the banks by the end of this calendar year," a senior treasury official of a leading private commercial bank (PCB) told the FE while explaining the impact of the government's decision.
He also said the growth of the secondary bond market may be hampered following the government's decision on the suspension of its securities auctions.
The Ministry of Finance had set a bank-borrowing target of Tk 282.03 billion for the FY18 to finance the budget deficit partly.
Under the proposed arrangement, Tk 208.87 billion will be borrowed from the banking system by issuing long-term Bangladesh Government Treasury Bonds (BGTBs) while the remaining Tk 73.16 billion through auctions of short-term T-bills.
Currently, three T-bills are being transacted through auctions to adjust the government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with tenures of 02, 05, 10, 15 and 20 years are traded on the market.
siddique.islam@gmail.com
