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NBE lifts bill purchase directive

The National Bank of Ethiopia (NBE) has lifted its yearlong mandatory requirement imposed on private banks to purchase bonds from the Development Bank of Ethiopia (DBE).

A new directive issued by the central bank this week, has repealed the old NBE-bill purchase directive,by which private banks were mandated to buy NBE’s bill,of 27 percent of every loan disbursement at a three percent interest rate with five year maturity period.

The need to have the old NBE bill directive, which was issued back in 2011, was justified where the funds from these private banks were directed to DBE.This was meant to be used to finance different public projects.

In addition, the banks have been earning five percent interests from deposits and pay seven percent. These requirements were sources of frustration for many banks in the sector.

Since 2011 alone, the private banks purchased NBE bills amounting to 116billion birr, of which 30 billion has matured and repaid.

“The repealed directive shall have effect with respect to any outstanding NBE Bill which has been issued before the coming into effect of this directive,” said the Bank. The new directive came into effect as of November 20, 2019.

In this regard, the central bank has said: “The repealed directive will have effect with respect to any outstanding NBE Bill which has been issued before the coming into effect of this directive.”

Currently, there are 16 private and two public banks. As of 2017/18, the total capital of these banks has increased by 10 percent, reaching 85.8 billion birr. Moreover, the banks have managed to mobilize 298.2 billion birr in the form of deposit, borrowing and loans.