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. 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. The move aims at streamlining liquidity management, improving regulatory reporting and encouraging banks to rely on market-based funding instruments instead of the outdated TT discounting facility.
End of an Era
The TT discounting 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.
Modernisation and Efficiency
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.
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.
