The Bangladesh Bank (BB) has intensified its open market operations by extending foreign currency support to the commercial banks aiming to meet import bills for food grains and fuel.

The central bank has taken the move to keep the country’s foreign exchange market stable by providing foreign exchange support to the banks, officials said.

Under the measures, the central bank sold at least US$28 million at market rate directly to four commercial banks Wednesday to meet the growing demand for the greenback.

Besides, the BB has temporarily resumed overdraft (OD) facilities to the commercial banks against their foreign exchange clearing accounts.

A state-owned commercial bank availed itself of the OD facility for $30 million Wednesday to settle its petroleum products import bills, they added.

But the BB has set a condition for such facility. Banks will be allowed to have such a facility only when an equivalent amount of local currency is kept with the BB through the reverse Repo auction.

Under the existing rules, the banks have to maintain foreign currency clearing accounts and deposits of at least 50 per cent of their total foreign exchange holdings with the central bank.

The banks regularly receive interest from the central bank against such deposits, which are in addition to the amount kept for meeting the statutory liquidity requirement (SLR).

“We will provide such facilities to the banks giving priority to help settlement of import bills, particularly that of food grains and petroleum products,” a BB senior official told the FE Wednesday.

He also said the central bank normally uses such tools in line with the market demand that helps minimise the supply and demand gap of the greenback.

The US dollar was quoted single rate at Tk 68.58 in the inter-bank foreign exchange market in the past three weeks despite short supply of the greenback in the market.

“A fresh pressure of the foreign exchange has been generated in the inter-bank foreign exchange market recently due mainly for increased imports including food grains and gasoline,” a senior treasury official of a private commercial bank told the FE.

However, the overall trend of opening of fresh letters of credit (LCs) against imports increased by 99.59 per cent during first 24 days of January ’08 against the corresponding period of the previous year.

The import LCs worth US$ 1.761 billion were opened during the period as against $882.62 million of the corresponding period of last year, according to the central bank statistics, released Monday last.

“The BB’s latest move will help keep the country’s foreign exchange market stable,” the treasury official observed.