Post-closure pressure for cliental rush sends commercial banks and nonbank financial institutions into a frenzy of borrowing from the central bank, some Tk 255.21 billion in a single day.
The exigent cash feeding by the Bangladesh Bank took place on Wednesday--the first day of the reopening of banks and other financial institutions after five-day closure in the wake of countrywide unrest in the backdrop of students' quota-reform movement.
In the meantime, the interbank money-market transaction rate or call-money rate also saw a surge Thursday amidst the liquidity shortages in some banks. Seven-day and 14-day call-money rates were recorded at 10.45 per cent and 10.70 per cent respectively on the day.
The banks -- including the shariah-based ones, which have suffered setbacks in recent times -- took the funds from the central bank as they lack cash following the drying up of ATM booths under withdrawal pressures and liquidity crunch.
The banking and nonbanking sectors remained under a total of five-day closure due to a two-day public holiday and a three-day unscheduled general holiday ending Tuesday.
Out of exigent borrowings, Shariah-based banks have taken about 6.0 per cent, drawn through their specialized instruments, while the remaining money has gone for feeding other banks and financial institutions including primary-dealer banks.
Bangladesh Bank (BB) disclosed this post-disturbance situation on the money market in press statement.
The products banks used to borrow from the central bank are repo, assured repo, ALS (Assured Liquidity Support) and IBLF (Islami Bank Liquidity Facility). The tenures range between seven days and 28 days.
The interest the banks will pay to the Bangladesh Bank ranges between 8.5 per cent and 8.75 per cent on an annualized basis.
People familiar with the brusque developments at the BB told the FE that banks may use the borrowed money to meet their deficit and cash reserve ratio (CRR) deficit with the central bank.
Again, many banks took the funds to meet the needs of customers with cash.
"Demand for cash has increased as a result of five days' closure of banking activity," says one central banker.
Under the borrowing auction held Wednesday, 14 banks and two financial institutions took Tk 50.07 billion under seven-day repo facility, nine banks took Tk 23.70 billion under 14-day repo facility, Tk 71.97 billion was taken by 12 banks and two financial institutions under the 28-day repo facility.
Three banks took Tk 56.91 billion under 180-day assured repo, Tk 37.74 billion were lent under assured liquidity support given to 11 primary-dealer banks (PDs) under one day.
One Islamic bank took Tk 4.97 billion under 14-day-tenure Islamic Banks Liquidity Facility.
Five Islamic banks took Tk 9.84 billion under the Islamic Banks Liquidity Facility for a period of 14 days.
jasimharoon@yahoo.com