The government’s net borrowing from the banking sector turned negative in the first half of this financial year because of surge in the net investment in the national savings certificates and bonds. According to the Bangladesh Bank data released on Sunday, the government made no net borrowing from the banking sources in the July-December period of the FY 2014-15 but made net repayment of Tk 34.49 crore in the period.
The government’s net bank borrowing was Tk 5,168.57 crore in the first half of the FY 2013-14.
The BB data showed that the government borrowed Tk 9,686.14 crore from the scheduled banks in the first six months of the FY15 while it repaid the central bank Tk 9,720.64 crore against its previous loans, making the government’s overall bank borrowing negative of Tk 34.49 crore.
A BB official told New Age on Sunday that the government had got a respite from the bank borrowing in the first six months as the net investment in the national savings certificates and bonds surpassed Tk 10,500 crore in just five months (July-November) 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 between July and October 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 212.88 per cent to Tk 10,542.41 crore in the first five months of the FY15 from Tk 3,369.41 crore during the same period a financial year ago.
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 government’s bank borrowing might increase in the second half of the FY15 as the government had taken a plan to decrease the rate of interest on the NSCs to curb the upward trend in the investment in the tools.
The government is now monitoring closely the investment trend in the savings tools and it is likely to cut the rate of interest on NSCs in the quickest possible time, a DNS official said.
The government has recently started the implementation process of the Padma Multipurpose Bridge that will also push up the government borrowing.
Former BB governor Salehuddin Ahmed told New Age on Sunday that the government borrowing had
recently decreased due to high net investment in the NSCs.
A number of banks have massively cut the rate of interest on the deposit products that has forced the client to invest in the NSCs, he said.
‘I have heard that banks are going to cut the rates on deposit products further that will fuel the net investment in the savings instruments,’ he said.
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 former BB governor 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.
Salehuddin said that implementation of the annual development programme was now very slow that also played a role in decreasing the government borrowing.
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 budget, the government targeted to borrow Tk 31,221 crore from the banking source against Tk 29,982 crore in the FY14.
-With New Age input
