Net borrowing of the government from the country’s banking system was Tk6,958.29 crore till September 14 of the current fiscal year.
During the period July to September 14, it borrowed Tk21,110.41 crore from the scheduled banks and repaid Tk14,152.11 crore to the Bangladesh Bank (BB).
As a result, net borrowing stood at Tk6,958.29 crore, according to the latest data from the BB.
The government had many accounts with the BB and typically borrowed against treasury bills and bonds through those accounts if needed, said Bangladesh Bank executive director Habibur Rahman.
When the government’s money was deposited into these accounts, it was shown as being repaid, he added.
As per BB data, the government’s net bank borrowing dropped to Tk6,958.29 crore till September 14 of the FY21 against Tk26,902.8 crore borrowed in the same period last year.
Talking to Dhaka Tribune, former Bangladesh Bank governor Salahuddin Ahmed said the government's net bank borrowing had dropped because Tk14,152.11 crore were repaid by the government.
Borrowing from the banking system would increase in the coming days as revenue earnings kept declining, he added.
He said several mega projects of the government were at a standstill due to the coronavirus. When these projects get underway the expenditure will shoot up.
The rising trend of NSC sales and the increased inflow of budgetary assistance from multinational lenders in the first couple of months of the current fiscal year had been other reasons behind the drop in borrowing, according to bankers.
In July of this fiscal year, the net sales of NSCs increased by 28.85% to Tk3,705.24 crore against Tk2,875.57 crore in the same month of FY20, as per BB data.
The government had not stopped or reduced borrowing from the banking system but changed its strategy, said Pubali Bank managing director and CEO Abdul Halim Chowdhury.
He said the government had increased its borrowing from scheduled banks than from the central bank.
Bankers said they had witnessed an increased demand for NSCs in the first couple of months of the current fiscal year as savers started to divert their funds from banks to NSCs.
After the imposition of a lending rate cap in April many banks have brought down interest rates against deposits to as low as 4-6%, disappointing people who have savings in banks, while the maximum rate for savings certificates is still above 12%.
Primarily, the banking sector would get more scope for lending to the private sector if the government could contain its bank borrowing in the current FY21, bankers said.
On the other hand, borrowing against NSCs would increase the interest payment burden for the government in the coming days, they warned.
The overall budget deficit was projected at Tk1,90, 000 crore for the current 2020-21 fiscal year. Of the deficit, Tk84,980crore will be borrowed from the banking system, while Tk20,000 crore will come from national savings schemes.