BB ups NOP limits for banks
Monday, 14 September 2009
Siddique Islam
The central bank has increased the net open position (NOP) limits of commercial banks for holding foreign exchange in order to keep the inter-bank foreign exchange market stable.
The Bangladesh Bank (BB) re-fixed the NOP limit of 45 commercial banks out of 48 to US$517 million Sunday from $432 million earlier, officials said.
On May 7, the central bank re-fixed the NOP limit of all commercial banks to US$432 million from $190 million.
The new NOP has been determined on the basis of 15 per cent of the total capital of the banks as on December 31, 2008.
The NOP limit of two state-owned banks and one private commercial bank were not increased due to their negative capital status, the BB officials confirmed.
"We've informed the revised NOP limit to the banks and asked them to maintain the new NOP limit for holding foreign exchange," a BB senior official told the FE, adding that the BB's latest move would empower the banks to retain more foreign exchange.
The official also said the BB's intervention in the inter-bank foreign exchange market through purchase of US dollar from the banks directly will reduce as the NOP limit of the banks has now been raised.
The central bank took the move against the backdrop of increased flow of foreign exchange in the market as well as capital base of the banks because of falling trend in opening of letters of credit (LCs) against imports recently.
Besides, the declining trend in prices of major commodities including petroleum products in the global market has also boosted the supply of the greenback in the local market, the BB officials added.
The bankers, however, welcomed the BB's latest move, saying that it would help them settle foreign exchange transaction better.
"The new rules will help reduce selling pressure of foreign exchange," a senior treasury official of a private commercial bank told the FE, adding that the rules will also help the banks to settle large amount foreign exchange transactions with their own funds.
The central bank continues its intervention in the inter-bank foreign exchange market through buying the US currency from the commercial banks directly aiming to keep stable the market.
The BB purchased $1.202 billion from commercial banks until September 10 last as part of the move.
In fiscal 2008-09, the BB bought a total of $1.48 billion directly from the commercial banks against only $202.50 million of the previous fiscal, according to the central bank statistics.
The central bank has increased the net open position (NOP) limits of commercial banks for holding foreign exchange in order to keep the inter-bank foreign exchange market stable.
The Bangladesh Bank (BB) re-fixed the NOP limit of 45 commercial banks out of 48 to US$517 million Sunday from $432 million earlier, officials said.
On May 7, the central bank re-fixed the NOP limit of all commercial banks to US$432 million from $190 million.
The new NOP has been determined on the basis of 15 per cent of the total capital of the banks as on December 31, 2008.
The NOP limit of two state-owned banks and one private commercial bank were not increased due to their negative capital status, the BB officials confirmed.
"We've informed the revised NOP limit to the banks and asked them to maintain the new NOP limit for holding foreign exchange," a BB senior official told the FE, adding that the BB's latest move would empower the banks to retain more foreign exchange.
The official also said the BB's intervention in the inter-bank foreign exchange market through purchase of US dollar from the banks directly will reduce as the NOP limit of the banks has now been raised.
The central bank took the move against the backdrop of increased flow of foreign exchange in the market as well as capital base of the banks because of falling trend in opening of letters of credit (LCs) against imports recently.
Besides, the declining trend in prices of major commodities including petroleum products in the global market has also boosted the supply of the greenback in the local market, the BB officials added.
The bankers, however, welcomed the BB's latest move, saying that it would help them settle foreign exchange transaction better.
"The new rules will help reduce selling pressure of foreign exchange," a senior treasury official of a private commercial bank told the FE, adding that the rules will also help the banks to settle large amount foreign exchange transactions with their own funds.
The central bank continues its intervention in the inter-bank foreign exchange market through buying the US currency from the commercial banks directly aiming to keep stable the market.
The BB purchased $1.202 billion from commercial banks until September 10 last as part of the move.
In fiscal 2008-09, the BB bought a total of $1.48 billion directly from the commercial banks against only $202.50 million of the previous fiscal, according to the central bank statistics.