Bangladesh Bank has opted to discontinue the 28-dah and 14-day Repo, the central bank is borrowing platform, to enhance the inter-bank call money market and alleviate reliance on the regulator, keeping only the 7-day Repo facility operational.
A repurchase agreement, which is known as a repo, is a form of short-term borrowing, mainly in government securities. Banks are selling their underlying securities to the central bank, and through an agreement between two parties, they buy them back shortly. Usually those days, at a slightly higher price. From now through Repo, the market regulator will not apply extra charges for taking money. Yesterday (24 February) at a meeting with policymakers and the heads of treasury departments from state-owned and private banks, that time the Bangladesh Bank decline these decisions. Senior bank officer told The Business Standard that the 28-day Repo recently used more constantly. The central bank explained that their target is making open market operations for banks and financial institutions more effective under the interest rate corridor by renew the market. Repo auctions are recently held for 7, 14, and 28 days, but the 28-day facility will be discontinued in March or April and the 14-day facility from June or July, leaving only the 7-day repo that will be available in the upcoming months, as said by a central bank policymaker. Generally, commercial banks give borrowed funds through the report facility daily, but Bangladesh Bank paused this as a part of the IMF’s billion conditions. From 1 July, repo facilities were limited to Mondays or Wednesdays, since November, with auctions reduced to once a week; even further, the window is now being tightened. Another policymaker said the IMF loan conditions require reducing Repo tools. The official noted, “Many banks rely on the central bank instead of the call money market, hindering their ability development.”. After their statement, all of the employees who are responsible all agree and give us the proper validation to work on it, which will be better for all banks.
To maintain the Cash Reserve Ratio (CRR), all banks have to take relaxation in the obligation. At the central bank, a policy-level officer said to TBS that recently, banks are essential to maintain 4% of their overall deposits as CRR. Moreover, if some days it is allowed to be reduced to a minimum of 3.4%, the 14-day average must remain 4%.
Source: The Business Standard
