Primary dealer (PD) banks and a non-banking financial institution (NBFI) are facing liquidity problem as amended guidelines have squeezed support from the central bank.
Under the amended guidelines, the PDs will be given liquidity support facility against devolved treasury bills and bonds for a maximum period of one month from the date of issue of such securities.
Besides, three top performing PDs will be selected on the basis of their success ratio and turnover, and they will be entitled to get such facility for a maximum period of two months, according to the amended guidelines.
The central bank will select top three PDs considering their performance on participations in the primary auction and secondary transactions of the government-approved securities on quarterly basis, officials said.
Earlier, the PDs were allowed to get such support for a period not exceeding one month at a stretch.
The Bangladesh Bank (BB) accepted 75 per cent repo auction bids from all the four participating PDs Wednesday to meet their liquidity support against devolved treasury bills and bonds.
"We've accepted the auction bids in line with our high-powered auction committee's decision," a BB senior official told the FE without elaborating.
On the other hand, a treasury official of a PD bank told the FE that they were facing 25 per cent liquidity shortfall of their total requirement as the BB accepted the repo auction bids partially.
He also said that the PDs may face penalty due to shortfall in cash reserve requirement (CRR) if the central bank does no consider the matter that arises from the devolved securities on them.
Under the guidelines, each of the bank and non-bank PD will underwrite a minimum of 12 per cent and 4.0 per cent of the auction amount respectively.
The newly formed Primary Dealers Association of Bangladesh (PDAB) has already submitted a letter urging the central bank to provide liquidity support on both success bids and devolved amount of the securities.
The members of PDAB are expected to sit today (Thursday) for an emergency meeting aiming to take a concrete decision to resolve their liquidity problem.
"We've discussed the matter internally among our members to find a solution to the problem," a member of the PDAB told the FE.
"We're worried about the existing liquidity position of our member banks and NBFI," he said, adding that some PD banks may face penalty because of failure to comply with the existing CRR rule of the BB.
Earlier, the central bank selected nine PDs - eight banks and a non-banking financial institution (NBFIs) - to handle government-approved securities in the secondary bond market and issued a guideline for them.
The PDs will subscribe and underwrite primary issues and make secondary trading deals with two-way price quotations.
A PD will not short-sell any particular issue and will not hold a short position in secondary dealings. The PDs will not act as inter-bank or inter-dealer brokers as specified in the guideline.
