Cut in cap on banks' T-bills holdings

A cap on commercial banks’ holdings of Treasury bills in Mauritius will drop to 18% of liquid assets in July from 20% now, the head of the banking association said last night.

The central bank announced the Treasury bill cap on banks in March in a bid to spur banks to use excess liquidity to lend to the private sector rather than investing in short-term government securities.

Commercial banks in Mauritius have repeatedly said that they are unable to lend more simply because there are not enough private sector projects. Ravin Dajee, chief executive officer of Barclays Bank Mauritius and Chairman of the Mauritius Bankers Association said the cut had been agreed after discussions with the central bank.

The Bank of Mauritius has only once accepted bids for 91-day Treasury bills at weekly auctions since mid-February when yields hit record lows, in a bid to direct banks’ liquid assets elsewhere. Mr Dajee said banks in Mauritius should look offshore to find more business . 

“With 400,000 of bankable population and 13 banks competing on the local market, I think Mauritius is overbanked but there is enough room for competition on the offshore market,” he said. “Given that the local market is overbanked we should prepare for consolidation,” he added.