A key liquidity instrument of Bangladesh Bank, the Assured Liquidity Support (ALS), has come under scrutiny as officials consider scrapping the facility despite its heavy use by primary dealer (PD) banks.

Introduced in 2008 to help PD banks meet their obligations in government securities auctions, ALS has, in recent years, functioned largely as an overnight borrowing tool to meet cash reserve requirements.

With no devolvement of securities occurring in the past four fiscal years, the central bank argues the facility is redundant and distorts competition by favouring PD banks over non-PD institutions.

Official data show that of Tk 1.43 trillion in exceptional liquidity support extended in July, PD banks drew Tk 1.31 trillion—over 84% of the total—primarily through ALS. Monthly borrowing under the scheme reached as high as Tk 973 billion in May.

The finance ministry approved new PD guidelines in June, removing the facility, but implementation was deferred amid concerns about liquidity stress. The issue is expected to be reviewed at a ministry meeting this week.

Bankers, however, caution that ending ALS abruptly could further tighten liquidity.