BM Desk : Commercial banks will no longer be able to borrow money from Bangladesh Bank for 14 days or repo due to the liquidity issue starting next month.

The central bank had already ended the 28-day repo on April 10. This month was the planned closure date for the 14-day repository. However, Arif Hossain Khan, the executive director and spokesperson for Bangladesh Bank, made a suggestion about it.
He stated on Tuesday that the governor had issued a directive. We’ll close the 14-day repository. This will go into effect in July. Repo is the term for the money that commercial banks borrow from the central bank when they are experiencing a liquidity problem. Through a “repurchase agreement,” or repo, its interest rate is set.

Additionally, banks deposit their excess funds with the central bank through reverse repo, also known as SDF starting July. The central bank may also remove surplus liquidity from the market if it so chooses.
Bangladesh Bank uses these two strategies to buy and sell government assets in order to keep the market’s money supply balanced.
Only 7-day and 14-day auctions are being conducted. Only 7-day auctions will take place if the 14-day repository is closed. Repo auctions are held once a week, on Tuesdays.

For a long time, the International Monetary Fund (IMF) has been advising banks to discontinue offering 28- and 14-day repo facilities.

Bangladesh Bank seeks to improve banks’ liquidity management, according to Mohammad Ali, Managing Director of Pubali Bank. Banks will therefore borrow funds in the 7-day repo if the 14-day repo is closed. Even so, you will need to take it more than once.
He thinks it won’t be too difficult to end the 14-day repos capability. The way banks handle their liquidity will need to be improved.
A top Bangladesh Bank official explained the closing of the repo by stating that the decision was made to switch from the 14-day and 28-day repo systems to the 7-day method. Banks will borrow from the Colmani if they require liquidity. The colmani market will benefit from this. However, banks in our nation don’t do that.

According to him, our nation’s banks are acting in the exact opposite way. Compared to interbank borrowing, they are taking out more loans from the central bank. In other words, banks will turn to Bangladesh Bank when they are unable to borrow funds from Kalmani or other sources.
According to this central bank official, the 7-day repo will be the sole and standard system.
He claimed that after reviewing the situation, Bangladesh Bank discovered that banks were borrowing money through 14- and 28-day repo and using it to purchase bonds and treasury bills. We must put an end to these. This is not how commercial banks can conduct business with the central bank. This choice has been made for that reason.