Siddique Islam (National News Service), Dhaka, Tuesday, April 05: Bangladesh is considering to introduce Dhaka Interbank Offered Rate (DIBOR) aiming at setting a benchmark for daily transaction in the market.
The DIBOR is the rate at which banks are prepared to lend to each other for specified maturities within the Dhaka market. It is also fixed daily for reference purposes and is a key interest rate level used for setting rates for loans and floating rate notes and for calculating cash settlements of certain interest rate derivative instruments.
A focus group on secondary market and settlement systems of bond market has recommended introduction of DIBOR to bring dynamism in the market, official sources said.
The group also suggested short, medium and long-term measures to improve the country's secondary bond market, the sources added.
Under the immediate short-term measures, the group recommended constructing a term structure of the yield curve to help the central bank assist in creating this structure immediately to jump-start the market.
"The market will be vibrant if the government moves to implement the time-bound recommendations," a member of the focus group told the correspondent, adding that the recommendations will be able to bring dynamism in the market.
Earlier, the BB formed a 13-member focus group, headed by General Manager of the Forex Reserve and Treasury Management Department of the central bank Belayet Hossain, for streamlining the market to overcome the barriers.
The group has already submitted its report to the central bank for taking necessary action to improve the market, BB sources said.
The government bonds and treasury bills are open to trade in the secondary market and stock exchange. But secondary trading of the securities is insignificant as compared with the primary issues of the securities.
"It is obvious that we need to go for a major reform in the development of a secondary market," the group said in its report, adding that the BB should consider policy changes to encourage trading.
"Most importantly, nothing can be achieved without participation of the market players," it noted.
The focus group recommended that the withholding tax on treasury bills and bonds should be withdrawn and all fixed income products should have equal taxes.
"In absence of any clear guideline for tax treatment in the secondary trading for government securities, there exists enormous confusion among the players and this effectively creates an impediment to the development of the secondary trading," the group noted. (End/si)
Leave a comment