The central bank on Monday started withdrawing excess liquidity deposited in commercial banks as it considers that such extra money is creating problems in the financial sector.
Following the process of withdrawing money from the banks through 'Bangladesh Bank Bill', Tk 7,567 crore has been withdrawn by Bangladesh Bank from the market in a day.
"We've decided to withdraw the excess liquidity from banks in maintaining discipline in the financial sector. BB has already sent letters to all banks asking them to participate in 'Bangladesh Bank Bill' auction on Monday," said an official of BB's Debt Management Department.
According to the Bangladesh Bank (BB), the 7-day and 14-day term of the bill is giving annual interest from 1.01 percent to a maximum of 1.30 percent.
All individuals and institutional investors residing in Bangladesh including banks and financial institutions were able to submit bids in this auction.
Any bank or financial institution operating current account with Bangladesh Bank can take part in the bids on behalf of its own and their individual or institutional investing customers, BB sources said.
In the first auction in September this year, Tk 3,619 crore was raised at 1.01 per cent interest on a 7-day term bill and Tk 3,950 crore on a 14-day term bill at 1.30 per cent interest.
Liquidity in banking system is on the rise as expatriate income has increased during Covid-19. Besides, deposits in banks are also increasing.
The central bank sources said, on last June, country's banking sector surplus liquidity stood at Tk 2.50 lakh crore due to lack of demand for loans. Of this amount, about Tk 60,000 crore remain idle in the banks. The rest of the money has been used to buy various bills and bonds. The bank does not get any interest from the idle money.
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, Bangladesh Bank will pick it up.
Earlier, on March 29, 2016, the central bank withdrew the excess money from the banking system in this manner.
