The inter-bank call money rate is unlikely to rise ahead of the Eid-ul-Azha, as the overall excess liquidity with the banks increased by over 22 per cent or Tk 171 billion in this June.
The call money rate has been showing an upward trend since August 12, mainly due to higher withdrawal of cash money from the banks ahead of the Eid, according to the market operators.
The trend may continue until August 20, the last working day before the Eid vacation, they explained, while ruling out any possible significant increase in the call rate.
The call money rate ranged between 0.70 per cent and 5.0 per cent on Tuesday against the previous range between 0.25 per cent and 5.0 per cent on Sunday.
The weighted average rate (WAR) on call money rose to 3.29 per cent on August 14 from 2.17 per cent two days ago, according to the Bangladesh Bank's (BB) latest statistics.
The volume of overall transactions in the market reached Tk 103.07 billion on August 14 from Tk 84.89 billion on August 12.
The call money rate witnessed an upward trend on Thursday, said the market operators.
They added that most of the deals were settled at rates varying between 4.0 per cent and 5.0 per cent on the day.
The call money rate is unlikely to cross maximum 5.0 per cent ahead of the upcoming Eid, they predicted.
The market insiders said most of the banks took necessary measures by holding adequate liquidity to avoid any possible pressure on the money market ahead of the Eid.
Some banks are now holding excess liquidity that may be used to meet the growing demand for cash before the Eid, they added.
"We're not interested to invest our excess funds in the BB bills, mainly due to minimal yield on the monetary instruments," said a senior treasury official of a leading private commercial bank (PCB).
The weighted average yield (WAY) on 07-Day BB Bills came down to 0.03 per cent on August 13 from 0.05 per cent on August 08, the BB data showed.
On the other hand, the central bank has unofficially suspended the auction of 30-Day BB Bills since April 01 to help mitigate the liquidity crunch in the banking system.
The banks have already been empowered to use around Tk 30 billion, as the BB has revised the advance-deposit ratio (ADR) calculation formula for relaxing their reserve requirement.
"We may use the money as loanable fund," the PCB official noted.
The banks are now eligible to add net investment in bonds, particularly in the subordinate ones, as their total time and demand liabilities to meet the ADR requirement, according to the revised ADR calculation formula.
Besides, the banks will have to maintain both cash reserve requirement (CRR) and statutory liquidity ratio (SLR) requirement with BB only for net investment in such bonds instead of the previous gross investment amount.
"There is no liquidity problem right now. So the call money rate remains stable despite higher withdrawal of cash from the banks ahead of the Eid," a BB senior official told the FE.
He also said the overall excess liquidity with the banks increased significantly until June, as the banks offered higher interest rates to collect deposits from both individuals and institutions.
The amount of excess liquidity rose to around Tk 940 billion in June from Tk 769 billion three months back. It was Tk 712.36 billion in January, according to the BB officials.
The banks were able to use Tk 103 billion additional fund since April 15 after implementation of the revised CRR rules, he added.
Under the revised rules, the banks are now maintaining 5.50 per cent CRR with BB, instead of the previous 6.50 per cent, from their total demand and time liabilities on a bi-weekly basis.
The major portion of the excess liquidity has already been invested in the government-approved securities and the BB bills as risk-free investments for the banks, the central banker added.
However, excess reserves, generally known as excess over daily minimum CRR with the central bank, rose to around Tk 55 billion during the period under review from Tk 34 billion in March.
Talking to the FE, another senior treasury official of a PCB said the overall excess liquidity in the banking sector is still in a satisfactory level that is helping to keep the money market stable despite higher withdrawal of cash from the banks before the Eid.
"Such short-term borrowings normally increase before the Eid to meet the growing demand for money from the banks," he noted.
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