Country's non-banking financial institutions (NBFIs) have put a thrust on streamlining the 'funding source' to cope with the rising competition in the deposit mobilization drive of the commercial banks and FIs.

"We have to activate the bond market and some of the banks and FIs have already opted for issuing convertible bonds and right shares to cope with the ongoing 'tough situation' in view of the government's increased bank borrowing target," chairman of Bangladesh Leasing and Finance Companies Association (BLFCA) Asad Khan told The FE in an interview recently.

The government has increased its bank borrowing target by more than 47 per cent to Tk 279 billion to finance the budget deficit of the current fiscal year ending June.

Market operators expressed their deep concern over the increased bank borrowing target saying that it might hit the liquidity position of commercial banks, particularly the primary dealers (PDs), besides affecting investment in the private sector.

Under the revised target, the government is set to borrow Tk 279 billion from the country's banking system against the original budgetary target of Tk 189.57 billion.

The PDs earlier urged the government to review the debt management strategy, particularly that concerning the ratio of T-bills and bonds, to minimise their fund mismatch.

The government borrowing from banking system increased by more than three times until March 25 this year compared to the corresponding period of the last year.

The government's net borrowing from banking system shot up to Tk 169.67 billion during the period under review as against Tk 48.92 billion in the same period the previous year, according to Bangladesh Bank statistics.

During the period, the government borrowed Tk 113.77 billion from the scheduled banks through issuing T-bills and bonds during the period, while Tk 55.90 billion was borrowed from the central bank to finance the budget deficit.

Market players, however, expressed their worries over the increased bank borrowing target of the government, saying that it might have impact on the liquidity position of the country's commercial banks, particularly the PDs.

The BLFCA chairman has also reiterated the demand to allow them keep the 'government fund' in their deposit basket.

"We urgently need the support from the government to keep our business alive as our fund source from commercial banks remains almost restricted in recent years," Mr Asad Khan said.

He said government should consider their demand in view of the NBFIs' growing contribution in the country's industrialisation.

Financial Express/Bangladesh/ 9th April 2012