Govt going to cut borrowing from banks to lowest level

The government is set to borrow Tk 12.50 billion from banks in February-the lowest single-month tally in the ongoing fiscal year-after slashing its target significantly for the last 13 days of January.
Officials said the central bank had already announced the auction calendar on government Treasury Bills (T-bills) and Bangladesh Government Treasury Bonds (BGTBs) for the month of February.
The government borrowed maximum Tk 110 billion from the banking system through issuing its T-bills and BGTBs in July 2015, according to central bank statistics.
"We've announced the auction calendar for this month (Feb) in line with the finance ministry advice," a senior official of the Bangladesh Bank (BB) told the FE Sunday, without elaborating.
Under the funding arrangement, the government is set to borrow Tk 10 billion with T-bills and the remaining Tk 2.50 billion would be borrowed by issuing BGTBs.
"The Ministry of Finance has finalised the auction calendar for the month of February considering proper use of excess liquidity with the government," a senior official close to the government debt-management activities explained.
Currently, government holds around Tk 60 billion in surplus liquidity in its accounts.
He said lower implementation of Annual Development Programme (ADP) projects and higher sales of savings instruments tipped the balance and helped the government lessen borrowing from the banking system.
"Declining trend in prices of commodities, including petroleum products, on the global market have also contributed to lower bank borrowing by the government," the official observed.
Earlier, the government had slashed its bank-borrowing target nearly 59 per cent to Tk 14 billion through issuing its treasury bills and bonds from January 19 to January 31 instead of Tk 34 billion.
Bankers, however, appeared worried over lower bank borrowing by the government, saying that it would push up excess liquidity with the banks as well as erode their profitability.
"Interest rates on both lending and deposit may fall further in the coming months if the lower level of government's bank borrowing continues," a senior official of a leading private commercial bank (PCB) told the FE.
Fluctuations in the government bank borrowing despite a negative trend in the first half (H1) of the FY 16 are hampering business plans of the banks, according to the private banker.
Meanwhile, the government repaid Tk 35.77 billion more than fresh borrowing from the banking system during the July-December period of the FY 16.
The borrowing was Tk 49.50 billion in the same period of the previous fiscal, the BB data showed.
The government is set to take Tk 385.23 billion from the country's banking system through issuing both short-and long-term securities during the current fiscal.
Under the proposed arrangement, Tk 241.82 billion will be borrowed by issuing long-term BGTBs while the remaining Tk 143.41 billion through auction of short-term T-bills.
Currently, three T-bills are being transacted through auctions to adjust 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 two, five, 10, 15 and 20 years respectively are traded on the money market.
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