Call money costs finally came down on Tuesday to hover within the interest rate corridor (IRC), soon after the central bank issued a warning aganist top executives of a dozen of banks allegedly contributing to the recent overflow of the corridor.
Sources at Bangladesh Bank (BB) said officials concerned discussed the issue on Tuesday and warned the banks involved in taking funds from interbank sources at much higher rates largely contributing to overshooting of the IRC.
Seeking anonymity, a BB official said a deputy governor of the central bank called top executives of a dozen of banks and warned them not to get involved in such costly borrowing anymore.
"It is decided that the banks which will do not comply with the instruction will see suspension of liquidity support from the central bank," the central banker said.
Soon after the warning, the average call money rate went down to 9.47 per cent on Tuesday from Monday's rate of 9.56 per cent.
Sources at the BB said there were options available with the BB, through which the commercial lenders could get liquidity support against their collateral - treasury bills and bonds.
"The banks might run out of the securities. That's probably the reason behind getting funds breaching the IRC," according to the source.
The central bank as part of its monetary-policy-modernisation framework launched the IRC starting from the ongoing financial year (FY'24) with fixation of a floor rate and an upper ceiling, stating that the call money rate would move within the corridor.
The IRC was earlier breached as the average rate of interbank borrowing went past the upper ceiling of the corridor -- 9.60 per cent on Sunday and 9.56 per cent on Monday.
The central bank in its latest half-yearly monetary policy statement set the upper ceiling called SLF (standing liquidity facility) of the IRC, lowering it by 25 basis points to 9.50 per cent.
Basically, banks lend money overnight to one another to address the asset-liability mismatch or meet sudden demand for funds.
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