The government’s net borrowing from the banking sector turned negative between July 1 and March 12 of this financial year because of surge in the net investment in the national savings certificates and bonds.
According to the latest Bangladesh Bank data, the government made no net borrowing from the banking sources in the first eight months and 12 days of the fiscal year 2014-15 but made net repayment of Tk 6,436.26 crore in the period.
The government’s net bank borrowing was Tk 7,483.48 crore in the first eight months and 12 days of the FY14.
The BB data showed that the government borrowed Tk 3,497.20 crore from the scheduled banks between July 1 and March 12 of the FY15 while it repaid the central bank Tk 9,933.45 crore against its previous loans, making the government’s overall bank borrowing negative of Tk 6,436.26 crore.
A BB official told New Age on Thursday that the government had got a respite from the bank borrowing in the first eight months as the net investment in the national savings certificates and bonds surpassed Tk 18,000 crore in the first eight months (July-February) of the FY15.
The government aimed to borrow Tk 9,056 crore from the NSCs in the FY15, but its borrowing through the tools crossed the target in the first four months of the FY15 as clients continued to invest heavily in the instruments due to low bank deposit rates amid sluggish business climate.
According to the Directorate of National Savings data, the net investment in the savings instruments increased by 192.73 per cent to Tk 18,283.14 crore in the first eight months of the FY15 against Tk 6,245.61 crore during the same period a financial year ago.
Banks are forced to cut the rates of interest on deposit products due to decreased loan disbursement in the private sector amid political unrest and uncertainty, the BB official said.
The maximum interest rate on NSCs is 13.49 per cent while the bank rate on deposit is between 5 per cent and 9 per cent which is encouraging the clients to invest in government savings tools instead of the banks’ deposit products, he said.
The government borrowing from the banking source stood at Tk 7,950.92 crore in the FY14 against Tk 24,570.98 crore in the FY13.
In the 2014-15 national budget, the government set a target to borrow Tk 31,221 crore from the banking source against Tk 29,982 crore in the FY14.
The government requires no big amount of borrowing from the banking sector right now, but it has to continue to borrow from the scheduled banks to maintain auction calendar.
The government prepared the auction calendar for treasury bill and T-bond at the beginning of the FY15 and it will receive loans from the scheduled banks in every week in line with the calendar.
For this reason, the government borrowing from the scheduled banks stood high in the first half of the FY15 against its negative borrowing figure from the central bank in the same period.
The BB official, however, said that the government’s bank borrowing might decrease more in the coming months as the government was yet to make a decision whether it would decline the rate of interest on the NSCs to curb the upward trend in the investment in the tools.
Source: New Age
