BB decides not to mop up funds for a month to address liquidity crunch
The central bank has decided to suspend mopping up money from the market for a month in a bid to ease the ongoing liquidity crisis in the banking sector.
The ongoing liquidity crunch has compelled the central bank to stop issuing bills for a month starting from Wednesday (1 December), said a Bangladesh Bank (BB) source.
The Bangladesh Bank Bill is a monetary instrument used to mop up liquidity from the market.
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The central bank, through auctioning bills, mopped up around Tk2,000 crore in November.
It also sold US dollars' worth Tk16,000 to the banks to halt the depreciation of Taka and meet the growing economic demand between August and November.
During the peak of the Covid-19 outbreak, investments declined but remittance inflow rose exponentially.
This led to the central bank purchasing dollars from the market and injecting money into the market.
Besides, cash was provided to the banks in order to implement the special incentive programmes aimed to support the economy amid the pandemic.
All these factors added, the banks were discouraged to collect deposits which resulted in further reduction of credit flow rate.
According to BB data, deposits at banks totalled Tk1,485,601 crore in FY2020-21, up by 13.8% from a year ago.
The figure rose to Tk1,510,718 by the end of September – a mere increase of 1.69% during the period of three months.
Meanwhile, imports saw a significant rise as the global Covid situation started to ease down since August this year.
Imports in September increased by 50.39% which was -7% during the same period last year.
In the three months from July to September, import costs grew by about 48%, compared to a negative -11% of the previous year.
Remittance inflow is also experiencing a steady decline since July 2021.
This suspension, however, will be reversed as soon as things get back to normal, the BB source told The Business Standard.
