Photo: Collected

DHAKA, Aug 3, 2026 (BSS) - Bangladesh Bank (BB) has abolished the Telegraphic 
Transfer (TT) discounting facility against liens on current accounts, ending 
a liquidity mechanism that had been in place for more than three decades as 
part of efforts to modernise the country's financial system.

The central bank announced the decision through BRPD Circular Letter No. 26 
issued today, saying the directive will take effect retrospectively from July 
1, 2026.

Officials said the move is aimed at streamlining liquidity management, 
improving regulatory reporting and encouraging banks to rely on market-based 
funding instruments instead of the outdated TT discounting facility.

The facility was introduced through BRPD Circular No. 5 on March 6, 1994, 
allowing scheduled banks to obtain liquidity by discounting telegraphic 
transfers against pledged securities.

In areas where Bangladesh Bank had no offices, Sonali Bank acted as its agent 
to facilitate the transactions.

The circular also allowed banks that lacked sufficient securities to access 
the facility by placing liens on their current accounts maintained with the 
central bank.

The system was subsequently revised through BRPD Circular No. 2 issued in 
April 1999 and BRPD Circular Letter No. 22 dated November 10, 1999, under 
which banks were required to maintain a lien equivalent to 20 percent of 
their approved TT discounting limit.

The lien amount was reviewed annually on July 1 based on the average 
utilisation of the facility during the previous year. Under the existing 
rules, the liened amount was excluded from the calculation of the Cash 
Reserve Ratio (CRR).

Bangladesh Bank said the TT discounting facility has become virtually 
obsolete with the development of modern liquidity management mechanisms in 
the banking sector.

Scheduled banks now meet their short-term liquidity needs through the call 
money market, repurchase agreements (Repo), the Standing Liquidity Facility 
(SLF) and inter-bank borrowing, which provide faster and more efficient 
access to funds.

According to the central bank, recent data showed that demand for the TT 
discounting facility has become negligible as banks increasingly rely on 
these market-based instruments.

The central bank also noted that the mandatory 20 percent lien had 
effectively become idle or "dead" capital because it was excluded from CRR 
calculations even when banks did not use the discounting facility. 

As a result, the blocked funds neither contributed to reserve requirements 
nor served any practical liquidity purpose, creating distortions in banks' 
liquidity positions and regulatory reporting.

With the abolition of the facility, banks will no longer be required to 
maintain such idle liens, allowing more efficient use of funds and more 
accurate reflection of their liquidity positions.

The retrospective implementation from July 1, 2026, means scheduled banks may 
need to revise their regulatory reporting and CRR calculations for the period 
following that date to reflect the release of previously liened funds.