Bangladesh Bank (BB) will start withdrawing excess liquidity held by banks on Monday (August 9) as it considers that such extra money is creating problems in the financial sector.
The process of withdrawing the excess money from banks through 'Bangladesh Bank Bill' will start from Monday, said a BB source.
"We've decided to withdraw the excess liquidity from banks in maintaining discipline in the financial sector. BB has already sent a letter to all banks asking them to participate in the 'Bangladesh Bank Bill' auction on Monday," said an official of BB's Debt Management Department.
BB sources said the surplus liquidity of the banks has been creating problems in the financial sector but it has not yet decided exactly how much money will be withdrawn through the 'Bangladesh Bank Bill' auction.
Liquidity in the banking system is rising as expatriate income has increased during Covid-19. Besides, deposits in banks are also increasing.
The central bank sources said about Tk 2.50 lakh crore have remained deposited in the banks. Of this amount, about Tk 60,000 crore remain idle in the entire banking system. The rest of the money has been used to buy various bills and bonds, said the source.
"There are allegations that many banks are misusing such huge idle money," the official added.
He said the central bank will adopt a new policy if inflation or asset prices rise due to excess liquidity.
On July 29 last, the central bank announced the monetary policy for the current financial year (FY22) and said that if excess liquidity creates a bubble in the financial sector, it will pick it up.
"The central bank will not hesitate to adopt a new policy if inflation or asset prices rise due to excess liquidity," said BB Governor Fazle Kabir while announcing the monetary policy.
While talking to the Bangladesh Post, a top official of a private bank acknowledged that they had received a letter from the BB to participate in the auction of 'Bangladesh Bank Bill' and said his bank will take the decision on Sunday regarding its participation in such auction.
Earlier, on March 29, 2016, the central bank withdrew the excess money from the banking system in this manner.
