Commercial banks having surplus funds are reluctant to invest in the collateral-free call money for prevailing trust deficit in their counterparts, and switching to secure state-guaranteed instruments.
Officials and bankers have said despite higher bets offered on the call-money market, the lenders feel comfortable to put their un-invested money in the Standing Deposit Facility (SDF) or reverse repo of Bangladesh Bank (BB), where the rate is quite low.
As a matter of fact, the SDF has suddenly turned into an investment hotcake for the commercial banks in very recent days.
According to statistics available with BB, there was only a single instance of a bank using SDF, amounting to around Tk 4.0 billion, throughout the last financial year (FY'24). But, in the last couple of weeks, scheduled banks on average daily deposited Tk 8.0 billion.
In the last two days (September 09 and 10), the banks kept Tk 13 billion and more than Tk 14 billion respectively in the SDF where the rate is 7.50 per cent while it is over 9.0 per cent on the call-money platform.
Seeking anonymity, a BB official said the inflow of bank funds continued rising in the SDF, which is quite surprising at a time when the demand for credits from the interbank sources is expected to be increased.
But things reversed this time. They saw operation of SDF only twice in the last three days as banks having excess credits normally invest in call- money platform and get handsome returns overnight and at short notice, the official said.
"But we're seeing different picture now as banks feel not comfortable in the call money. Trust deficit in the current context of banking operations could be the reason," says the central banker in explaining the switch.
According to the recent trend in call-money transaction, the volume of daily transactions in the call money was in-between Tk 80 billion and Tk 110 billion even in June last.
But the vibrancy on the call-money market has slowed down since July 2024 when the country observed nationwide massive protests by the students and citizens that led to the fall of the Awami League-dominated government on August 05, 2024.
Now the daily transaction volume dropped significantly, hovering in- between Tk 30 billion and Tk 40 billion, according to the BB sources.
Banks usually choose the emergency loans from the call-money market to fill the asset-liability mismatch, comply with the statutory CRR and SLR requirements and to meet any exigent demand for funds.
The FE senior correspondent talks to nearly a dozen of treasury heads of the private and public commercial banks over the change in use of the surplus funds.
The treasury head of a private commercial bank, preferring to remain anonymous, says there are banks having fund dearth that face difficulties to maintain a decent balance sheet because of not getting credits from the interbank sources.
"We often take credits from several public and private banks. But those banks are not interested to give them even overnight credit supports, which is unfortunate," he says.
The treasury official notes that the banking sector passes through a tough time following recent regulatory actions to reconstitute operational boards of several banks that led to massive-scale cash withdrawals from many banks, the small and midsize lenders in particular.
"If the banks having funds are not extending their credit supports to their counterparts, it will not be a good sign. I think the BB should make its regulatory interventions to this effect," he adds.
Seeking anonymity, the treasury head of another private commercial bank that has surplus funds says his bank like others has become very cautious in investing in the collateral-free call-money area especially in this challenging period of time.
"I got calls from some banks that required funds very recently. But our current bank policy is not to investment in any risky areas for the time being. That's why we reject their offers and deposited the money in the SDF, where the rate is lower but it is safe," he adds.
Managing Director and Chief Executive Officer of Mutual Trust Bank (MTB) Limited Syed Mahbubur Rahman says banks seem to be very cautious in using their funds to avert any further trouble in the current state of banking operations.
"The banks might prefer risk-free investment areas like government securities and SDF where there is guarantee of getting the money back," he adds.
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