Auction of BB Bills begins today

The central bank is going to implement its move to mop-up excess liquidity from the money market by issuing Bangladesh Bank Bills from Monday (today).

BB initiated the move in line with its announcement in the monetary policy statement for the fiscal year 2021-2022 announced on July 29.

In line with the central bank schedules, there will be nine auction days starting from August 9 and it will end by the end of this month.

Bangladesh Bank on Thursday issued a letter to the managing directors and chief executives of all scheduled banks and financial institutions to take part in the auction of Bangladesh Bank bills.

The letter said that BB has decided to ensure stability in the money market by withdrawing excess liquidity from the banking sector.

The auction durations are- 7, 14 and 30 day. The 7 and 14 day duration auctions start today and also on 18th and 25th August. On the other hand, the 30-day auction of the central bank will be held on August 11, 23 and 31.

According to Bangladesh Bank, there is a surplus liquidity of Tk 2,31,462 crore in the banking sector till June. The sector’s liquidity started to accumulate as demands for loans remained low amid the Covid-19 pandemic.

Central bank officials said, the central bank has not yet made a decision on exactly how much money will be withdrawn from the banking sector through the bb bill. The yield rates of these bills for a period of 7, 14 and 30 days will be determined on the basis of bidding of the banks. That is, the auction committee will determine the yield rate based on the demand of the bill.

Experts say that if the interest rate is much lower than expected, banks will not be interested in the Bangladesh Bank Bill. Meanwhile, the Debt Management Department of Bangladesh Bank provides liquidity in the money market and removes liquidity from the market. The department is also responsible for providing loans from the banking sector as per the demand of the government.

The excess liquidity in the banking sector has resulted in a sharp decline in the deposit rate in the banking sector. The falling deposit rate was among other reasons behind the central bank’s initiative to mop-up liquidity from the market.

The last time money was withdrawn from banks was on March 29, 2018 through Bangladesh Bank Bill.