The government’s net borrowing from the country’s banking system dropped by 74.13 per cent or Tk 19,944.51 crore year-on-year till September 14 of the current fiscal year 2020-2021 due mainly to a rebound in the sales of national savings certificates.
Besides the NSC sales issue, the inflow of budgetary assistance from multinational lenders in the first couple of months of the current fiscal year was another reason for a drop in the government’s net borrowing from the banking system, Bangladesh Bank officials said.
Even though the tax revenue collection by the government was dismal in the first two months of FY21, the improved NSC sales situation and foreign loans and grants helped the government keep bank borrowing low during the period, they said.
As per the central bank data, the government’s net bank borrowing dropped to Tk 6,958.29 crore till September 14 of FY21 against Tk 26,902.8 crore in the same period last fiscal year.
Though the government’s net borrowing from the banking system was not that high, its borrowing from the scheduled banks increased by Tk 21,110.41 crore in two and a half months of FY21.
The net borrowing from scheduled bank increased to Tk 1,54,579.92 crore on September 14 from Tk 1,33,469.51 crore at the end of June this year.
However, the government repaid Tk 14,152.11 crore to the central bank during the period, lowering its net outstanding borrowing from the central bank to Tk 30,201.38 crore on September 14 this year from Tk 44,353.5 crore at the end of June this year.
Bankers said that the they had witnessed an increased demand for NSCs in the first couple of months of the fiscal year as savers, who were eligible to invest in the NSCs, had started diverting their funds from banks to NSCs as the banks had started lowering deposit rates further since April 1 this year when the 9-per cent regulatory maximum limit on lending rate came into force.
After the imposition of lending rate cap, many banks have brought down interest rates against deposits to as low as 4-6 per cent, dejecting the savers, while the government is still offering up to 12 per cent interest against the NSCs.
In July this year, the net sales of NSCs increased by 28.85 per cent to Tk 3,705.24 crore against Tk 2,875.57 crore in the same month of FY20.
The country’s banking sector would get more scope for lending the private sector if the government can contain its bank borrowing in FY21, bankers said.
But, the borrowing against NSCs would increase the interest payment burden on the government in the coming days, they said. The increased sales of NSCs and flow of foreign loans and grants have helped the government contain its bank borrowing so far, they said.
In the budget for FY21, the revenue collection target was set at Tk 3,78,000 crore, leaving deficit of Tk 1,90,000 crore.
For deficit financing, the government has planned to collect Tk 1,09,983crore from the domestic sources including Tk 84,980 crore from the banking system.
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