Dealer banks have to maintain 75pc of SLR in Bangladesh Govt securities

The primary dealer banks and non-bank financial institutions will have to maintain 75 per cent of their statutory liquidity reserve, instead of earlier 50 per cent, in government securities, the Bangladesh Bank announced in a circular on Thursday.

As a result of the latest BB move, the government, which already borrowed around Tk 7,000 crore in July 1 to September 15 of the current fiscal year, will get an enhanced scope for borrowing from the banking system, central bank officials said.

The circular issued by the BB Department of Offsite Supervision says new investment ceiling in the Health to Maturity or HTM securities including treasury bonds has been reset for the time being at 75 per cent of the SLR of the primary dealers in the purchasing month will come into effect from October 1.

At present, three treasury bills are transacted through auctions to adjust the government borrowing from the banking system. The treasury bills have 91-day, 182-day, and 364-day maturity periods, while four government bonds of 5-year, 10-year, 15-year, and 20-year tenures are being traded on the market. Investment in the treasury bonds is regarded as the fulfilment of SLR ratio set by the Bangladesh bank.

The central bank earlier selected 15 primary dealers – 12 banks and three NBFIs – to handle government-approved securities on the secondary market. A primary dealer is a bank or securities broker-dealer that can trade directly with the Bangladesh Bank.

The primary dealers subscribe and underwrite primary issues and make secondary trading deals through two-way price quotations.

Meanwhile, in a separate circular issued on Thursday, the BB Debt Management Department extended the validity of the latest bids submitted by the primary dealers in primary auction of government securities until further notification.

Earlier in June 21, the deadline for making fresh bids for treasury bills and government bonds by the primary dealers was set at September 30.According to the central bank regulation, primary dealers have bindings to invest in the government bonds but until December 31, 2010, they had not been allowed to sell them to individuals or other institutions due to the absence of a secondary market. But, since January 2011, the primary dealers can sell the treasury bonds only to other banks and NBFIs as well as to life insurance companies.

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