The Bhutanese Leading the way.
In exercise of the powers conferred by Section 362 of the Financial Services Act of Bhutan 2011, the Royal Monetary Authority of Bhutan (RMA) issued the guidelines on Certificate of Deposits(CDs) which will be effective from 03 January 2017.
The above guideline on CD was approved by the RMA Board during its 119th meeting held on 23rd November 2016.
Management of domestic liquidity has always been a cornerstone for effective financial intermediation process. ln order to encourage channelizing short term liquidity from surplus to deficient sources quickly, adequately and at a reasonable cost, it is important for the financial sector to develop a vibrant domestic money market.
Access to effective and diversified financial instruments such as money market instruments (MMls) will assist financial institutions to improve funding sources and liquidity management, while at the same time providing domestic investors with wider investment choices.
More importantly, development of short term debt market is a step towards promoting capital market in the country which will provide a benchmark or reference interest rate for short terrn funds.
To initiate the process of developing short term inter-financial institutions lending, the RMA formulated the MMI guidelines to enable the financial institutions to issue and trade in CDs. The CDs are negotiable money market instrument issued against funds raised by the commercial banks as deposits with a tenor not more than one year.
To compliment the development of MMls, the guidelines for Commercial Papers shall be issued by the Registrar of Companies in pursuant to the Provisions of the Companies Act 2016. The above terms and conditions provide a broad institutional and regulatory framework for the issuance of Certificate of Deposits by bank.
