BB's fund withdrawal makes no impact on money market

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Siddique Islam
The central bank withdrew Tk 20.47 billion in the last 15 days using its monetary tool, which has left no impact on the money market, treasury officials said.
The Bangladesh Bank (BB) withdrew Tk 7.30 billion from the banking system Monday using the 30-day Bangladesh Bank Bills to mop up excess liquidity from the market.
The central bank accepted 12 bids worth Tk 7.30 billion in the third auction of the short-term monetary tool held at the central bank on the day.
A total of 14 bidders offered bids worth Tk 8.80 billion for the bills, the central bank officials confirmed.
The rate of weighted average yield, generally known as interest rate, of the accepted bids was 0.99 per cent per annum, they said.
A total of Tk 7.32 was withdrawn through the second auction, held on August 17 while the central bank mopped up Tk 5.85 billion in the first auction, held on August 10 last, according to the central bank statistics.
"It is a temporary measure. When the market will move forward, the measure may be suspended," a senior BB official told the FE, adding that the central bank would continue such operation in the next week also.
He also said the central bank reintroduced the auction of 30-day Bangladesh Bank Bills on August 10 aiming to mop up the excess liquidity from the market.
The overall excess liquidity with the commercial banks stood at Tk 347 billion in June last, accounting for 165 per cent growth over the corresponding period of the previous fiscal.
Besides, the central bank has withdrawn Tk 1.96 billion through selling treasury bills (T-Bills) directly to three commercial banks three weeks back using its secondary window, the BB officials added.
Currently, three T-bills are being transacted through auctions to adjust the government borrowing from the banking system.
The T-bills have the maturity periods of 91 days, 182 days and 364 days.
According to treasury officials, the BB's two successive interventions are yet to make any positive impact on the country's money market because of the lower interest rate of the bills.
"Some banks are not interested to invest their surplus funds in the short-term tool because of lower yield," a senior treasury official of a commercial bank told the FE.
The treasury official also said the market will move only after resumption of the reverse repurchase agreement (repo) auction, which was suspended nearly five months back.
The demand for funds in the inter-bank call money market is now so poor that most of the deals Monday were concluded at rates between 0.15 per cent and 0.20 per cent, market operators said.
They also said non-acceptance of reverse repurchase agreement (repo) by the central bank since March 25 last also contributed to the decline in call rate sharply.
"The BB does not accept the reverse repo. Instead, it is injecting fresh funds through purchase of the US dollar from the commercial banks continuously," another treasury official of a commercial bank told the FE while giving reasons of the sharp fall in the call money rate.