Banks turn their back on call money mkt

Siddique Islam | Published: March 29, 2015 00:00:00 | Updated: November 30, 2024 06:01:00

Overall transactions on the call money market have dropped drastically in the recent days as lender banks now prefer lucrative alternatives for higher earnings, bankers said.
The overall turnover on the inter-bank money market fell more than 47 per cent to Tk 27.96 billion on March 25-the last working day of the past week-- from Tk 53.29 billion on March 16, according to central bank's statistics.
Banks now rush for bigger bucks from making investment in shorter-term saving tools, sources in the banking circles said.Â Â Â Â Â Â
"We prefer to invest our excess funds in inter-bank Repo and term deposits for higher earnings than that from the call money market," a senior official of a leading state-owned commercial bank (SoCB) told the FE Saturday.
The call rate ranged between 7.0 per cent and 8.0 per cent in the last seven working days--unchanged from the previous marks.
But most of the deals were settled at rates between 7.50 per cent and 8.0 per cent, market operators said.
The lender banks easily lend their funds on the inter-bank Repo market by charging interest rates between 8.00 and 8.50 per cent, they added.
"Some lender banks are also investing their funds in cash-hungry banks and non-banking financial institutions (NBFIs) in the form of inter-bank placement, generally known as FDR (fixed deposit receipt), for mostly one month and three months' maturity to receive higher interests than that from call money," the SoCB official noted.
Talking to the FE, a senior treasury official of a leading private commercial bank said the call-money rate almost stagnated recently following intervention by Bangladesh Bank (BB) unofficially.
The private banker said the BB discourages offering higher rates on the call money market without assigning any reason so that the excess funds are invested in both inter-bank Repo and inter-bank placement.
Denying the allegation of intervention in the money market, a senior BB official said the interest rates on both call money and inter-bank Repo have been determined by the market forces.
"The banks are free to invest their funds in inter-bank Repo market than the call money one," the central banker said, without elaborating.
siddique.islam@gmail.com