Bangladesh Bank injected Tk 25,521 crore into banks and financial institutions on Wednesday to tackle severe liquidity pressure caused by bank closures, lack of cash in ATM booths, and a nationwide internet shutdown, which led to a surge in demand for cash withdrawals.
Out of this amount, Shariah-based banks received about Tk 1,500 crore, with the remaining funds allocated to other banks and financial institutions, the central bank disclosed it in a press release on Thursday.
Wednesday marked the first day when banks and offices reopened following a five-day shutdown prompted by three days of general holidays and nationwide curfews in response to escalating violence during student protests over quota reforms in public service. The reopening saw a spike in cash withdrawals as people sought to access funds after the extended period of limited banking services.
To address this surge and ensure sufficient liquidity in the banks, an auction of Bangladesh Bank repo, assured repo, and assured liquidity support (ALS) for commercial banks and financial institutions, as well as the Islamic Banks Liquidity Facility (IBLF) for Shariah-based banks, was held.
In that auction, 14 banks and two financial institutions submitted 68 bids amounting to Tk 5,007.29 crore for a seven-day repo facility. Additionally, nine banks submitted 17 bids totalling Tk 2,370.39 crore for a 14-day repo facility. For the 28-day repo facility, 12 banks and two financial institutions submitted 75 bids amounting to Tk 7,197.16 crore. For the 180-day assured repo facility, three banks submitted three bids amounting to Tk 5,691.34 crore.
Furthermore, 11 Primary Dealer (PD) banks submitted 35 bids totalling Tk 3,774.22 crore for a one-day assured liquidity support facility. One bank submitted a single bid amounting to Tk 497.00 crore for a 14-day Islamic Banks liquidity facility. Five banks submitted five bids totalling Tk 984.00 crore for a 28-day Islamic Banks liquidity facility.
The central bank confirmed that all bids were accepted by the auction committee, resulting in a total disbursement of Tk 25,521.40 crore under the repo, assured repo, ALS, and IBLF facilities. The interest rates for the 7, 14, and 28-day repo, assured repo, and assured liquidity support facilities were set at 8.60 per cent, 8.70 per cent, 8.75 per cent, 8.50 per cent, and 8.50 per cent per annum, respectively. The Expected Profit Rate (EPR) for the 14-day IBLF was 5.50 per cent, and the range for the 28-day IBLF was between 3.25 per cent and 6.50 per cent.
An official from a bank's treasury department, speaking on condition of anonymity, said that many banks use this borrowed money to cover their cash reserve ratio (CRR) deficits with the central bank. Additionally, it helps banks meet the increased demand for cash from customers.
The official further said that the demand for cash withdrawals has risen significantly in recent times, affecting not only bank branches but also ATMs.
