The inter-bank call money rate dropped to as low as 2.50 per cent on Tuesday after more than five years as the central bank further squeezed its reverse REPO (repurchase agreement) acceptance level, bankers said.
The call rate ranged between 2.50 per cent and 5.0 per cent on the day, unchanged from the previous level. But most of the deals were made at rates between 3.0 per cent and 3.50 per cent, according to the market operators.
They said the call money rate was 2.50 per cent in July 2010.
The central bank has been squeezing the acceptance of reverse REPO since October 19 with a view to forcing the banks and non-banking financial institutions (NBFIs) to invest their excess liquidity, particularly in different productive sectors.
"We've given a message to banks and NBFIs through reducing our acceptance level with regard to reverse REPO to boost their investment in productive sectors by slashing interest rates on lending," a senior official of the Bangladesh Bank (BB) told the FE.
On the other hand, the central bank resumed the auction of 30-day Bangladesh Bank Bills on October 26 to mop up surplus liquidity from the market, he explained.
BB has already mopped up Tk 137.85 billion from the market through three auctions of its 30-day bills from October 26 to November 9, according to the official figures.
On Monday, the central bank withdrew Tk 58.70 billion from the market using such bills. The rate of weighted average yield of the accepted bids was 3.39 per cent.
Lower demand for fresh credit as well as option of foreign currency loans by local companies have contributed to the downtrend in call money rates, according to treasury officials of different commercial banks.
Most of the corporate entities prefer foreign currency loans than local ones mainly due to lower interest rates, the treasury officials explained.
They expect that the call money rate may move slightly upward with the resumption of 30-day BB bill auction.
"Mopping up excess liquidity from the market will depend on the yield of the bill," a senior treasury official of a leading private commercial bank (PCB) told the FE.
He also said the banks and NBFIs will feel encouraged to participate in the auction, if the interest rate of the bills is near to 91-day treasury bill (T-bill).
The yield, generally known as interest rate, on 91-day T-bill decreased to 2.41-2.48 per cent on Sunday from 3.19-3.49 per cent of the previous auction, held on November 1.
The central bank earlier used such bills for purchasing the US dollar from the banks directly to keep reserve money within its monetary programme.
The BB reintroduced 30-day and 91-day Bangladesh Bank Bills in October 2006 as monetary policy instruments, following a decision that the T-bills and bond auctions would be exclusively used for the government debt management.
However, the auction of 91-day Bangladesh Bank Bills was discontinued to avoid duplication with 91-day T-bills from January 8, 2008.
The central bank withdrew Tk 15.33 billion from the market on Tuesday through reverse REPO auction. The rate of interest on reverse REPO was 5.25 percent.
On the day, BB received 12 bids from the banks and NBFIs amounting to Tk 80.68 billion, but accepted Tk 15.33 billion.
Meanwhile, the overall excess liquidity with the commercial banks stood at around Tk 1.15 trillion as of October 15. But major portion of the funds has been invested in the risk-free government securities, another BB official said.
He also said the excess reserve, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, stood at around Tk 34 billion.
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BB changes stance on reverse REPO use
Siddique Islam | Published: November 11, 2015 00:00:00 | Updated: November 30, 2024 06:01:00
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