Remuneration reserve on government securities is where the profit on the
government securities is booked. While loss on securities is accounted in profit and loss acc. but this effect is countered by the principal which is paid at the maturity of the security. Basel is followed to boost the financial strength of a bank or an financial organization. It also protects the interest of the depositor during bankruptcy or collapse. The bank or financial institution keeps a reserve in the central bank by allocating a portion of the profit. basel 3 is followed in Bangladesh. Minimum capital requirement is satisfied from the remuneration reserve on government securities. To maintain the crr, money can be obtained from call money market where overnight instrument are sold. Banks with surplus reserve lends the money and vice versa. Even in case of dire need to maintain liquidity, the central bank does not help out the bank, despite the fact that the banks have huge cash reserves in there. This is very unfortunate, because if words get around of the lack of security, the depositor will panic and withdraw all their savings. The situation was very dire 2-3 years back because of this. But this situation has been overcome, even if in a very insignificant scale. Due to political instability, the economy is stagnant and there is very little investment. Credit growth has declined and because there is no import of capital machineries and outflow of cash, reserve is increasing which consequently lead to the increase of reserve (22 billion dollar) in the central bank. This increase in reserve does not indicate the improvement in economy, the economy is actually inflated. The government does not allow the primary dealer to resign their position. The government does not accept the reasonable bidding of the primary dealers who are privately owned even if the bidding is reasonable. Instead the government influence, shonali and janata bank to to bid at a very low rate which is harmful for the other primary dealers. The other banks who are in very sound stage are not interested to buy government securities as the secondary market is very poor. This situation is drastically different from the neighboring country. There people lobby to become the primary dealer as the return is very high while here primary dealer are desperate to relinquish the position. There are three source of inflow of foreign currency : export, remittance from manpower and the money sent by expatriates.