The introduction of a liquidity-boosting derivative known as Assured Repo (AR) emerges from special bonds, offering relief to banks amid liquidity challenges. The government’s issuance of Tk 260 billion in special bonds, aimed at clearing arrears to power producers and fertilizer suppliers, introduces the AR facility with unique features like an 182-day tenure. These bonds, exempt from yearly mark-to-market evaluation, allow bondholders to access liquidity from the Bangladesh Bank at an attractive 8.0% policy rate. Banks are leveraging this liquidity by investing in short-term government securities, yielding higher returns. While banks benefit from the liquidity infusion, concerns arise over the long-term lock-in period of these bonds. Nevertheless, industry leaders view this initiative positively and advocate for similar support in other sectors. Fertilizer importers and independent power producers (IPPs) stand to benefit from the bonds, addressing their substantial payment backlogs.
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