Govt to launch another short-term tool to better manage cash

The government has decided to introduce yet another short term bill for better handling of cash management, sources said.

The instrument namely, 'cash management bill' will be of 14 days' limit which recently got approval of the Cash and Debt Management Committee (CDMC), they added.

 "We are examining the pros and cons of the bill. It will be introduced soon," general manager of Debt Management Department of Bangladesh Bank (BB) Bishnu Pada Saha told the FE.

He said according to international accounting practice no financial instrument can be of without limit. "Presently, overdrafts (ODs) have no time limit. We are under pressure to bring ODs within a time frame," he added.

Mr Saha said directives are there to make adjustment of ODs within 14 days of issuance.

He said the CDMC has decided that from now on the central bank will monitor overdraft management. If the tenure of ODs goes beyond 14 days, the central bank will issue cash management bill after informing the government.

The rate of interest of cash management bill will be lower than 30-day Bangladesh Bank Bill. The interest rate may be around 6.25 per cent like interest rate of ODs.

At a recent meeting at the ministry of finance, the CDMC members said the bill will be a good instrument for effective cash management. They said India has 7-day cash management bill.

A senior finance ministry official told the FE that due to the low tenure the cash management bill will have good demand in the market.

A senior central bank official said the BB is now working on fixation of rate of interest, and issue and auction system of the cash management bill.  It will soon send details of the bill to the ministry of finance for final approval.

Executive Director of BB Sudhir Chandra Das told the FE Sunday that presently the government's cash position is in a good condition.

He said the government can borrow Tk 40 billion by issuing each OD and wage and means advance (WMA) to meet its cash demand.

 "The cash management bill will be issued based on needs. When OD tenure crosses 14 days, cash management bill will be issued against the extra borrowing of the government," Mr Das said.

He said once the state of government's cash position becomes healthy the cash management bill will be adjusted immediately.

Regarding the rate of interest of cash management bill, Mr Das said the bill will be auctioned and the market will decide the rate.