BB stops providing daily repo loans to banks
Staff Correspondent
The Bangladesh Bank on Monday announced it would stop providing daily short-term loans to banks under the repurchase agreement (repo) facility to better manage the country’s currency market in line with IMF demands.
From 1 July, the bank would be extending the loans only twice a week on Mondays and Wednesdays, it said adding auctions for other lending facilities – liquidity support facility (ALSF), and standing liquidity facility (SLF). Islamic bank liquidity facility (IBLF) – would continue on a daily basis.
In case of a holiday on Monday or Wednesday, the repo auction would be held the next working day, the central bank said in a circular.
In addition, the daily avialability of other financial tools like ALSF and SLF are likely prevent a new liquidity crisis from hitting the banking sector.
Banks sell their holdings of government securities or financial assets to the central bank on the condition of buying these back at a higher price within a very short interval, usually a day. The banks use the sales proceeds to cater for short term liquidity needs.
